The FTSE 100‘s filled with a vast array of world-class companies. But Ashtead Group (LSE:AHT) currently holds the crown for best-performing investment over the last 20 years. And not by a small margin.
Since September 2003, the Ashtead share price is up a jaw-dropping 35,422%. But including the extra gains from dividend reinvestment over the two decades, this return surges to 51,192%!
To put these numbers into perspective, that’s an average annualised gain of 36.6% versus the FTSE 100’s average of 8%. And it’s enough to take an initial investment of £10,000 and transform it into over £5,119,200. And even in 2024, the company continues to fly.
The growth opportunity keeps growing
Despite the stock’s tremendous success, it remains relatively unpopular. Ashtead rarely appears on the most popular UK shares lists among brokers, and its average trading volume’s significantly lower compared to other FTSE 100 stocks like Lloyds, Rolls-Royce, or BP.
To be fair, it’s unlikely that Ashtead shares will be delivering near 52x returns again anytime soon. So investor interest may simply be elsewhere in the hunt for the ‘next’ Ashtead. But in my opinion, the current Ashtead still holds impressive potential.
As an equipment rental enterprise, the firm has its fingers in a lot of different industrial pies. That includes film & TV, building maintenance, music festivals and, of course, construction. The latter is one of its primary sources of income. And that’s a critical piece of information since over 80% of sales actually come from the US not the UK.
For the investors who’ve missed it, the US has been very busy ramping up infrastructure investments, from repairing roads to building entire semiconductor foundries. And it’s put trillions of dollars behind these projects, many of which have been delayed into 2025 as interest rates are expected to be lower.
In other words, Ashtead could be looking at a massive surge in demand for its equipment fleet next year. And with it, even more earnings growth.
What could go wrong?
Ashtead’s managed to defy countless expectations over the years. Its reward for doing so has been becoming the industry leader in the UK while growing to second place in the US and Canada. However, a growing trend within the rental industry is consolidation.
Right now, the sector largely consists of thousands of independent providers, which are slowly being gobbled up by the likes of Ashtead, fuelling the expansion of market share. But over time, the firm will have to start competing against bigger rivals that management seems to be largely sidestepping right now.
Whether the company will have the skill to continue taking market share as competition becomes more fierce is untested and unknown. Should it fail, the group’s tremendous growth may start to die down, and with it, the Ashtead share price.
