Jon Brachle, co-manager of JPMorgan US Smaller Companies Investment Trust (JUSC), explains why he invests in storage space provider WillScott Mobile Mini (US:WSC).
The US small-cap sector has seen strong growth so far this year. While the S&P 500 Index hit new all time highs at the end of the summer, small caps have delivered more measured returns, having risen for five consecutive quarters.
Over the 12 months to the end of September, the Russell 2000 small-cap index rose nearly 50 per cent, outperforming the S&P 500 large-cap index by almost 18 per cent. This has been driven by optimism on the economic recovery, fuelled by the easing of lockdowns and people adapting to the new normal.
Within US small-caps, we try to identify quality businesses at reasonable valuations, focusing in particular on leaders within niche markets. One such example is WillScot Mobile Mini, a provider of portable accommodation and secure storage containers. The company hosts a national network of 16 site locations across the US with over 40,000 units, and has around 17,000 customers.
As an industry leader in flexible workspace and portable storage solutions, this company is well positioned to stand the test of time in a period when people are being forced to adapt to flexible working. The company was formed by the merger of WillScot and Mobile Mini in 2020, and their product lines include mobile office trailers, portable classrooms, modular complexes, panelised modular units and portable storage containers.
We were initially attracted to this company because the pricing environment is solid, and it has strong recurring revenues from long duration leases and high margins, and strong free cash flow generation. The company also has a strong balance sheet which is a must when it comes to stock picking for our portfolio.
WillScot Mobile Mini’s business is recovering well following the pandemic and has performed better than expected. The demand environment remains robust, with both consumers and businesses continuing to look for flexible work solutions.”
WillScot Mobile Mini was JPMorgan US Smaller Companies Investment Trust’s largest holding at the end of September accounting for 1.9 per cent of its assets.
