Ashtead Group (LSE:AHT), a U.K.-based construction and industrial equipment rental company, was the largest contributor for the fiscal year. Sunbelt, the U.S. rental division of the company, accounts for over 80% of Ashtead’s revenue and nearly 90% of its operating profit. Sunbelt is the dominant second player in a highly fragmented market and experienced 20% revenue growth for the fiscal year, four times that of the industry. The structural shift toward renting equipment continues, and the number of longer term projects is also increasing. Historically, customers bought equipment for longer term projects, but increasingly, they are now choosing to rent instead. The shift to longer term equipment rental shows that customers have grown more comfortable with the equipment rental model, which allows customers to procure well-maintained equipment at the right location at the right time and also helps reduce capital intensity. Ashtead’s management team has diversified into highly profitable new end markets by leveraging existing routes to market. We believe the company has significant scale advantages, has opportunities for strong growth and is run by an excellent management team.
From David Herro (Trades, Portfolio)'s third quarter 2018 Oakmark International Fund commentary.
