Let the Games Begin - WillScott - WSC
It will be an interesting test over the next 18 months to watch pro-growth economic policies at work, and then have them voted on in the September 2026 mid-terms.
It was an emotional moment to watch Trump sign the BBB. Let’s be very clear, this is not the work of Donald John Trump. Mr. Trump is standing on the shoulders of some very important thinkers. Only a fool would call this policy the “Trump Tax Cuts”. Let’s come with a more accurate name. How about:
“Hayek/Kemp/Reagan/Mundell/Laffer/Waniski/Gilder/Bartley/Lehrman/Kudlow - Tax Cuts”
or just HKRMLWGBLK Tax Cuts for short
There is plenty of crap in the BBB, but at its heart it is a “Supply Side” policy, and all those listed above were part of the original battles to implement pro-growth policies.
Those early battles were difficult. They should never be under-estimated.
Let’s conclude with a great Hayek quote:
Hayek - “the chief root of our current monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples which have given to an age old superstition that by increasing the aggregate of money expenditure we can lastingly ensue prosperity and full employment.”
In the next 18 months, we have the chance to throw the Keynesians on the “ash heap” of history alongside Marxism.
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Why is all this economic theory mumbo jumbo necessary?
Our Treasury Secretary said the purpose of the BBB is “to create a wave of capital spending”. Mr Bessent is a wise man. He has listened to many corporate quarterly calls in his day. He knows it is difficult, but not impossible, to get companies to make capital expenditures. The key to prosperity is building the supply side of the economy through new investment.
How can we profit from this change?
We already own Middleby (cap ex by restaurants), Chart (cap ex for energy storage), RXO (trucking), Teck (copper), Rayonier (lumber), Halliburton (cap ex for energy) and Steel Dynamics (steel).
What would be the next best name to add to benefit from the positive trend in capital spending?
The problem is many of the industrial stocks are selling at rich valuations. Easy answers like Illinois Tool, Rockwell Automation, or Caterpillar are way too expensive, as are many industrials. So we have to get creative.
Let’s look are all Industrials and Materials stocks at least 25% below their 5-year highs, > $2 billion that is 160 stocks
In the end I came up with a new idea called WillScott Holding - WSC - $29, but not until after I considered:
simple would be another steel stock Nucor - NUE - $138
tricky would be metal treating chemical company Quaker Chemical - KWR - $124
another trucker, Maybe SAIA - SAIA - $295, kind of pricey, or Schneider - SNDR- $26, interesting
railcars - Trinity - TRN - $29, I hate the leasing side
beryllium - Materion - MTRN - $86, the old Brush Wellman, interesting
small business - Paychex - PAYX - $147 , yikes 27x
cement - Knife River - KNF - $81, too tied to housing
employment agencies - Robert Half - RHI - $43, need to learn more
housing related - Mohawk - MHK $111, is my favorite, but there are many to choose from maybe PPG, Simpson - SSD, Louisiana Pacific- LPX
leveraged ideas - Celanese - CE - $61
petrochemicals - Lyondell, Westlake, Huntsman, Stepan
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WillScott benefits from an increase in commercial construction. They lease temporary building that are needed at every construction site and are also the old Mobile-Mini (storage containers). They have about a 50% market share.
There is a great 3 hour Investor Day from March 2025, on their website.
WSC had bought back 20% of their shares in the last 5 years, and have been aggressive this last quarter.
There are growth opportunities in VAPS (value added products) like tables, chairs, sanitation, and fences.
If you believe WSC’s cash flow numbers, the stock sells at 10x free cash flow per share, and there is a clear path tp $4.00 to $6.00/per share in 3-5 years
Leasing companies are tricky, you need to consider the true level of maintenance capital expenditures.
Stay tuned to this channel.