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Ashtead Has Tooled Up Big Money for Many of Us, But Can it Continue?

By Malcolm Stacey | Monday 25 June 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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 Smashers. If I haven't covered Ashtead (AHT) for some time, it's because I sold the shares. And yet I wished I'd waited a bit longer.

The latest results this month showed profits had increased by about a fifth before tax. As had revenues. This is because the profit, sprightly though it is, was less than City expectations. These had been set high, though performance in the USA, where Ashtead is a big player, was not quite as healthy as predicted. You remember that Big Donald promised a lot of improvement to the country's infrastructure, not to mention the Mexican Wall.

I will not be renewing my association with Ashtead shares, simply because I find it hard to believe this famous tool hirer will continue to do so well. And in this country at least, house prices are falling.

But if you already hold Ashtead, I would probably hang on. Donald's plans may still come to fruition. And the USA's sad hurricane damage needs building equipment to restore.

Ashtead is one of those shares which has delighted share owners, but there is no clear reason why it should continue to succeed. And yet it nearly always pleasantly surprises.

It has been on the acquisition trail and that has led to quite a bit of debt. I rather hope it doesn't grow any more. The price/earnings multiple is only 15, but the prospective dividend yield for 2018 is a low 1.6%. With many more of us chasing bigger dividends, that level of yield could encourage investors to pull out. And yet those strong profits pull the other way.

My position remains the same, if I held the shares I would keep them pro tem, but would not be buying any more soon. Good things rarely last for ever.

Not even the Punter's Return.

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