During their latest episode of the VALUE: After Hours Podcast, Rotonti, Taylor, and Carlisle discuss The $30 Billion Stock No-One Knows. Here’s an excerpt from the episode:
John: [crosstalk] Yeah. Have you all heard of a company called Ferguson?
Tobias and Jake: No.
John: I know we just got a few minutes, but Ferguson is the largest distributor– I hope I’m about to blow your minds. It’s the largest distributor of– [crosstalk]
Jake: I’m sitting down.
John: Yeah. Of plumbing and HVAC supplies in the US. It has sales of $30 billion. It has a market cap of $30 billion. No one’s ever heard of it. No one’s ever heard of it. The reason no one’s heard of it is because until 2017, it was called Wolseley. In 2022, it switched its primary listing from the London Stock Exchange to the New York Stock Exchange. It’s not in any of the main indexes in the US yet. It hasn’t filed a US proxy yet. But this is a very high-quality business. Trust me, very-high quality business. At least, don’t trust me, but based on the research I’ve done.
Jake: Look for yourself.
John: Yeah. I think it’s a very high-quality business.
Jake: What’s the operating margin look like on a HVAC supplier?
John: The operating margins are solid. They’re very solid. It generates high returns on invested capital. I’m pulling up the operating margins for you. Very good free cash flow, free cash flow. So, EBIT margins 10%. 10%. It’s a good business. Now, here’s the thing. So, $30 billion business, I mean, sales $30 billion market cap. It has much higher sales than Grainger or Fastenal by double or more. But both Fastenal and Grainger have higher market caps. I don’t value things on a price to sales basis, but it just frames how large the valuation discrepancy is here.
Jake: It’s a good, clean measurement for a lot of things as a first approximation.
John: Yeah. It’s a $30 billion business. No one’s heard of it.
Tobias: I like that stuff, John.
Jake: 10 people have heard of it now.
John: Yeah. There you go.
Tobias: Top stars.
Jake: There’s 12.
Tobias: We’re coming up on time, John.
Tobias: If folks want to get in contact with you or follow along with what you’re doing, how do they do that?
John: Yeah, I’m on Twitter, @jrogrow. I also recently joined LinkedIn for the first time ever. So, I’m learning how to use LinkedIn.
Jake: Oh, boy. [laughs]
John: That’s it for now. I don’t know what my next step is going to be yet.
Tobias: Well, that was cool. Thanks very much for that.
Jake: Yeah, thank you.
Tobias: Good seeing, everybody. Good seeing you, JT. We’ll be back same time, same bat channel next week.
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