Distributors are amazing stocks. I’m looking for the next group of smaller cap industrial stocks that can replace the existing group of distributors that are now at high multiples.
distributors that i love but are too expensive include:
Ferguson $FERG +140% in 5yr, 23x PE, 40bn mkt cap
WWGrainger $GWW +240% – 27x , $50bn
Fastenal $FAST +90%, 35x, $40bn
There are others..
Why i love distributors:
1) Capital light
2) often consolidating fragmented markets through small roll-up m&a (often mom and pop competitors)
3) Route density is a great and easy way to improve margins.
4) often distribute critical parts that are also low cost. customers willing to pay for good service
I’m looking for the next group of industrial distributors. $BECN , $BLDR $WCC all seem interesting.. but BECN feels ripe
Beacon Roofing $BECN $6bn and on 14x PE
Beacon
1) Capital light distributor of roofing and other housebuilding products
2) rolling up fragmented market through small m&a
3) technology is becoming differentiator vs small competitors
4) Brad Jacob’s $QXO is looking to do a deal in the building products space. hopefully BECN isn’t the target
5) ongoing buyback (on its way to becoming a stock cannibal)
6) near term beneficiary from hurricanes..
Anyone have any other names that come to mind?
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