Picture supply: Getty Pictures
The US presidential election is tomorrow (5 November), and plenty of traders are speculating over how the inventory market is perhaps affected. Will it go up or down?
As a long-term investor, nonetheless, I’m much less bothered about short-term market swings. My main objective is to construct wealth for retirement by capitalising on long-term progress alternatives.
No matter who wins the race, I’d really feel snug scooping up shares of Ashtead Group (LSE: AHT) to carry for the subsequent few years. Right here’s why.
Very enticing returns
Ashtead proves that you just don’t must be an attractive AI-fuelled tech inventory to drive jaw-dropping returns. Working primarily underneath the Sunbelt Leases model, the agency rents out building and industrial gear (diggers, forklifts, excavators, scaffolding, visitors cones and extra). Hardly spine-tingling stuff.
But the inventory is up round 7,200% in 15 years, and 145% over the previous 5 years. Neither determine features a quickly rising dividend. This makes it one of many UK’s best-performing shares over the past 20 years.
Acquisition grasp
How has Ashtead achieved this? Effectively, the agency has a protracted historical past of efficiently making strategic acquisitions to broaden its market presence and repair choices, attaining economies of scale alongside the way in which. This makes it a basic instance of a serial acquirer.
At present, it’s the second-largest rental gear supplier in North America (behind United Leases). It has an 11% market share within the US and 9% in Canada. In the meantime, it leads the UK market, with a ten% share.
In the important thing US market, a lot of the trade stays divided amongst smaller gamers, with 62% managed by firms outdoors the ten largest corporations. This means that the market continues to be extremely fragmented and ripe for additional consolidation.
On prime of this, there’s an ongoing pattern towards leasing over possession, which means it is a rising trade.
Nonetheless progressing
In its Q1 2024/25 outcomes, Ashtead stated it had invested $855m so as to add a complete of 33 new areas in North America, as properly finishing up two bolt-on acquisitions for $53m.
Income elevated 2% yr on yr to $2.75bn, with rental income up 7%. EBITDA rose 5% to $1.28bn.
For the complete yr, Ashtead expects rental income progress of 5%-8%. So the corporate is making progress, regardless of weaker building spend as a result of increased rates of interest.
US mega-projects
In 2022, the US handed the $52bn CHIPS and Science Act, designed to spice up semiconductor manufacturing, and the $891bn Inflation Discount Act, which is concentrated on rising clear power manufacturing and different sustainability initiatives.
If he wins although, Trump has promised to rescind any unspent funds underneath the Inflation Discount Act (which he’s known as the “Green New Scam”). So it is a potential threat to progress.
However, I’d nonetheless count on Trump to decide to onshoring manufacturing exercise, significantly chip making, in addition to infrastructure spending. And as a result of AI increase, building of extra information centres appears sure.
On the Q1 earnings name, Ashtead’s administration put the general quantity of mega-project worth at $850bn over 600 tasks. So this stays a really important progress alternative within the years forward, whatever the election consequence.
The inventory’s ahead price-to-earnings ratio is 16.8, just under that of rival United Leases (17). Given this cheap valuation, I’d snap up Ashtead shares for the lengthy haul, if I hadn’t already achieved so.
