Another results statement from construction-related equipment hire company Ashtead (AHT), which I last wrote about back in December. I noted back then; 'I do like Ashtead as a business but to get really excited here you have to be really excited about the US industrial cycle. Some world trade angst suppression and not too many US Federal Reserve rate rises will probably allow the stock to ghost back up to that 20 quid level again.' ...
Now those of you hooked into the global central bank cycle will immediately observe that my December comment about higher interest rates looks a bit laughable today given the Federal Reserve are meeting this week in a quite possible precursor meeting to a July US interest cut...but who ever said that macroeconomic prediction was easy?! Of course what it actually reflects is that world trade angst combined with late cycle malaise has spooked the President - and possibly the central bank - towards rate cuts to keep the US economy on the straight and narrow at least until the 2020 election. The rental theme is a good 'un but it cannot buck the cycle and despite a 19% full year rise in revenue and operating profit, I just do not want to chase it here.
The story is all about the US (the UK business is around 10% of revenue and saw very modest revenue growth and a profit decline). I am not particularly convinced - a view I undoubtedly share with very long-term Ashtead shareholders who remember the period around the turn of the century when the company nearly went bust - that over-distributing cash flow via dividends and buybacks and hence pushing debt up is a smart thing to do. Nevertheless the board has 'confidence' and related. So if you love prospects for the US and think The Donald is structurally changing the local economy for the better then go for it and buy/hold the stock. As far as performing industrial stocks go, it is not expensive but it is all about what is coming and not what has gone.
In short, if we get less trade angst and a period of general market excitement, your geared plays for this are going to be more exposed to Europe and the emerging markets, not in dollar heavy earners. For me personally - as I noted back in December - I would much rather follow the lead of the old CEO who exited into the night a few months ago. Sometimes you just have to get off the stage when they are screaming for more.
Filed under: Ashtead, Woodford Income Focus fund, Lekoil, Chesterfield Resources, Brave Bison
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