Ferguson (FERG): Why Industrial Distribution Is an Attractive Investment

During their recent episode, Taylor, Carlisle, and Todd Wenning discussed Ferguson (FERG): Why Industrial Distribution Is an Attractive Investment. Here's an excerpt from the podcast:

[Todd]

So Ferguson is the phrase that I just have always used is balanced. They have, they're the second largest HVAC distributor in the U.S. after Watsco, and that's only 10% of their business. So they are extremely, extremely diversified.

Um, they, they focus primarily on the plumbing market. So not just home remodelling, but commercial, they've done quite well with a lot of the data centre build outs. Um, they've had, um, plumbing, the waterworks.

So, you know, new, new areas being developed. They need waterworks. They need, um, sewer lines and things like that.

Ferguson is, uh, one of the largest players there along with Coren, Maine as another one. Um, but interestingly, a good tie into the original Howden's piece is, um, there's, there's a, there's sort of a graveyard of UK companies that came to the U.S. trying to appeal to the U.S. consumer. Uh, Tesco being a great example.

Marks and Spencer, I think bought Brooks Brothers at one point. So there's a lot of this, a lot of, there's a long history of companies in the UK trying to come to the U.S. And vice versa, uh, and failing with the U.S. consumer. But there's a much better track record with UK companies coming into the U.S. on an industrial distribution basis, um, and employing a business to business model. So Ferguson was acquired by a UK company back in, I think, 1982. I could be off by a couple of years there, but, uh, it was acquired, um, by Wolseley in the UK. And so basically Wolseley financed a lot of the growth in Ferguson to take it to about 1500 locations around the U.S. And it eventually got so big that it relisted in the U.S. and rebased in the U.S. And so the, the Howden's parallel is, is interesting there because it's a very similar model in the sense that, hey, it's a business to business, industrial focused, uh, business plan, right? And so the track record there is not anywhere near as bad as it is for UK companies trying to come to the U.S. and sell to the U.S. consumer. Um, so, so Ferguson has about 1500 distribution centres, uh, around the U.S. and serve a variety of customers. They're about 50, 50 commercial and residential.

So again, balanced, right? Very diverse distributor, uh, in the U.S. focussing on water.