Ashtead (AHT) is a UK-listed equipment rental company that generates ~90% of its earnings in the US through Sunbelt Rentals, the second largest US player after United Rentals (URI).

Historically, equipment rental has been described as a deeply cyclical, commoditized business that struggled to earn its cost of capital throughout the cycle.

It’s a highly fragmented industry with relatively low barriers to entry for independent players to acquire equipment from OEM’s and rent out for a profit. In a downturn, customers run their owned equipment for longer and competitors heavily discount rental rates which destroys margins. Add leverage, and the combination of these factors has led us to steer clear of this industry.

However, after reading AHT’s recent CMD presentation, it seems like the company is now far more robust and potentially less cyclical compared to the previous decade. This is due to a few reasons: