I’d never take any investor seriously who suggested I put all my money into just one UK stock. My portfolio contains a little over 50 investments, comprising various individual shares, investment trusts, and index tracker funds.
I consider that pretty well diversified, though some investors have half that amount and many shareholders a lot more. Everyone has different goals and levels of risk tolerance, after all.
Having said that, I think it can be a useful exercise to think of just one stock I’d buy today, if I had to. As an investor, it can sharpen my focus, enabling me to filter out okayish stocks for those I think are far superior.
Here’s my pick.
Market beater
Ashtead Group (LSE: AHT) has been one of the greatest UK shares to own for years. The 20-year stock chart tells its own story.
While winners tend to keep on winning, there comes a point when that can stop being the case with shares. Take Amazon stock, for example. It famously made early investors considerably richer, assuming they were patient enough to buy the shares and then just sit back.
However, the stock has underperformed the market over the last five years. It’s up 30% versus a gain of 48% for the S&P 500. Meanwhile, Ashtead’s shares are up 178% in five years.
Hoovering up the small fry
As a reminder, the company rents out heavy construction and industrial machinery in the UK and North America. Think diggers, forklifts, power generators, personal protective equipment, and everything in between.
Trading though its Sunbelt Rentals brand, it’s second only to United Rentals in the vast US tool-hire market. It achieved that position through many dozens of bolt-on acquisitions.
Yet the market remains extremely fragmented, with both these top dogs commanding less than a third of the overall North American market between them. That leaves ample room for further consolidation over the next few years.
There are many benefits to companies renting tools and equipment for projects rather than owning them. They don’t have to maintain, insure or upgrade the equipment. But largely it comes down to cost. It’s just cheaper to hire than buy.
I like the simplicity of the business model, and that it’s increasingly profitable.
Ashtead’s financials at a glance
| Fiscal year (to 30 April) | Revenue ($) | Net income ($) |
| 2023 (expected) | $9.57bn | $1.63bn |
| 2022 | $7.96bn | $1.25bn |
| 2021 | $6.63bn | $930m |
| 2020 | $6.39bn | $936m |
| 2019 | $5.86bn | $1.03bn |
| 2018 | $4.95bn | $1.29bn |
Growth at a reasonable price
The stock has a price-to-earnings (P/E) ratio of 19. I consider that reasonable for such a rapidly growing company. When I bought the shares, it was even lower than that.
Plus, Ashtead is quietly growing into a bit of a dividend powerhouse. The yield may be low at 1.2%, but the company has been raising its payout for 16 consecutive years now. It recently lifted its interim dividend by 20%! That’s an added attraction for me.
The most immediate risk I see is a potential US recession, which could severely impact the construction industry (and Ashtead’s profits). However, longer term, I see powerful tailwinds from the US and UK rebuilding domestic supply chains after Covid and Brexit. That should underpin the company’s growth for years to come.
