Welcome to Episode 32 of the Preferred Shares Podcast.

In this episode, we explore the water thesis behind Ferguson Enterprises, a leading distributor of HVAC and plumbing solutions. To help walk us through the intricacies of the thesis, we are joined by Todd Wenning. Todd is a prior contributor at The Motley Fool, previously covered companies on the sell-side for Morningstar and the buy-side for Johnson Investment Counsel and Ensemble Capital Management. He’s a busy guy! He runs KNA Capital Management, LLC, an Ohio-registered investment advisor, and is the founder and editor of the newsletter Flyover Stocks. He is also currently teaching Portfolio Management at the University of Dayton.

In This Episode

The history of Ferguson — Its founding and early focus.

The water thesis — Why now is the right time.

The distributor model — How Ferguson’s position in the value chain makes it a prime beneficiary of the water thesis.

Full scope — The expansive SKU listings, inventory management, and diversified suppliers and customer bases that work with Ferguson.

The market — A look at market share and how competition has evolved.

Capital Allocation — How Ferguson redeploys capital across organic investments, bolt-on acquisitions, and capital returns to shareholders.

Reciprocity — How the HVAC and water sides of the business assist one another, creating a system greater than the sum of its parts.

Management — Exploring compensation, alignment, and horizon.

Risks — What could go wrong.

Closing Thoughts — The key things to focus on, and, taking the other side to the risks, what could go ‘more right.’

Additional Reading & Listening

Curious to see what else we’ve been working on? Check out some of the interesting things we’ve done recently:

Douglas Ott (Andvari Associates and @yesandnotyes)

* 📖 Remembering Marlboro Friday

* 📖 Tyler Technologies Investment Report

Lawrence Hamtil (Fortune Financial and @lhamtil)

* 📖 The Traits of an Ideal Industry

Devin LaSarre (Invariant and @DevinLaSarre)

* 📖 Edgar M. Cullman’s Brilliance

* 📖 Edgar M. Cullman’s Brilliance, Part Two

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Disclaimer

All opinions expressed by Preferred Shares hosts and guests are solely their own opinions and do not reflect the opinions of their respective employers. This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. None of the information contained in the podcast or this web site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person.

Clients of Andvari and Fortune Financial may maintain positions in the securities discussed in this podcast. Furthermore, from time to time, the Hosts may hold positions or other interests in securities mentioned in the Podcast and may trade for their own accounts based on the information presented. The Hosts may also take positions inconsistent with the views expressed in its messages on the Podcast.

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The Ferguson Water Thesis with Todd Wenning

Preferred Shares Podcast

The Ferguson Water Thesis with Todd Wenning