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Why Galloping Ashtead is More than Another Brick in the Wall

By Malcolm Stacey | Thursday 1 December 2016

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Pickers. Perhaps my favourite Footsie share is Ashtead (AHT). It was only recently that I brought it to your attention again. But I've thought of a few more encouraging vibes that you might like to hear about.

The shares have been rising so fast since Donald Trump became president-elect, that it has almost made up for this family’s thumping loss last week on Advanced Oncotherapy.

The first, almost comical, kick upwards was caused by the rumour that the much-vaunted wall across the Mexican border would need a lot of building gear to erect - Ashtead hires out small tools and big plant. 

But of course the real reason for the surge was that the Americans have been promised a general infrastructure programme that will require a lot of building. The company does so much business in the USA already that being paid in dollars enhances a balance sheet which is presented in pounds.

It will report quarterly results next week, and the City expects growth in revenue and profit to rise nicely. The dividend, which I have at only 1.04%, is also expected to rise. As I write the share is up another near 4%. It has risen by more than 40% in the last twelve months.

I now nurture a temptation to dump the whole lot, as such a big jump is rarely sustained. But the outlook, supported by the new President’s building policy, urges me to hang on, at least till the share hits 1800p. It’s currently 1567p.

Now the P/E ratio is not enticing as it used to be as it approaches 20. But operating profit over the last five years at least keeps on forging ahead and you can’t say that of many Footsie giants these days.

Though there has been the odd big correction in the past, I guess that Ashtead is just one of those companies for which it’s hard to envisage failure.

See you in the Punter’s Return?

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