Deep Research

Ferguson (FERG)

3 min read

Snapshot

  • Ticker: FERG (NYSE)
  • Bucket: Consumer, Fintech & Housing
  • Q1 2026 position: $34.1M — 146,355 shares, 0.68% of 13F
  • HQ: Newport News, Virginia
  • Business: North America’s largest distributor of plumbing, HVAC, and waterworks products — ~$31B of revenue serving residential and commercial trade contractors, increasingly including hyperscale data-center mechanical/cooling projects.

Business Overview

Ferguson is the scale aggregator in a fragmented trade-distribution market: it sells pipe, valves, fittings, fixtures, HVAC equipment, and waterworks infrastructure to professional contractors through a branch-plus-distribution-center network no competitor matches in North America. Fiscal 2025 (year ended July 2025) revenue was ~31.3B with net income around $2.0B, and issued 2026 guidance alongside a continued bolt-on M&A cadence (recent deals include HVAC distributors Moore Supply and rep firm HPS Specialties). Roughly half the business is residential (repair/remodel plus new construction) and half non-residential.

The non-residential half is where the story has changed: Ferguson has become a meaningful supplier to mega-projects, especially data centers. On a single large data-center job the company disclosed supplying 5,700 liquid-cooling assemblies, 57,000 valves, 12 miles of copper pipe, and 19+ miles of water and fire lines — more than 100M of open orders on that one project. Double-digit non-residential growth is offsetting a still-sluggish housing backdrop.

Financial Trajectory

PeriodRevenueNotes
FY2024 (ended Jul 2024)$29.6B ()Flattish; housing downturn
FY2025 (ended Jul 2025)~$30.8BNet income ~$1.86B
Calendar 2025~$31.3B (+5.0%)Net income ~$2.0B; double-digit non-res growth; 2026 guidance issued

Why Atreides Owns It

Ferguson is the rare position that touches both of Atreides’ macro theses at once. First, housing: like Wayfair and Rocket, it is leverage to a normalization of US housing turnover — every existing-home transaction and remodel pulls plumbing and HVAC product through Ferguson’s branches, and the residential half of the business is running below trend with recovery optionality. Second, watts: Baker’s “watts and wafers” framing holds that the binding constraints on AI are power and silicon, and the power constraint is increasingly thermal — liquid cooling at the rack and facility level. Ferguson is a picks-and-shovels distributor to that buildout (cooling assemblies, valves, pipe, water infrastructure for data centers) without taking any technology risk on whose cooling architecture wins. A distributor compounding mid-single-digits with bolt-on M&A, counter-cyclical cash flow, and a free data-center kicker fits the Quality Growth sleeve. The steady six-quarter trim suggests it has served as a funding source rather than a rising-conviction position.

Position History

QuarterTypeShares/NotionalValue% of 13F
Q4 2024Common301,576$52,344,5461.15%
Q1 2025Common280,079$44,877,0581.36%
Q2 2025Common297,956$64,879,9191.80%
Q3 2025Common222,624$49,996,8980.97%
Q4 2025Common177,917$39,609,6620.48%
Q1 2026Common146,355$34,138,7670.68%

Held all six quarters but bled down steadily: share count has been cut roughly in half from the Q4 2024 level (302k → 146k), with the trimming concentrated after Q2 2025. No options overlays, no whipsaws — just a slow de-emphasis, consistent with capital being recycled into higher-conviction AI names while keeping a toehold on the housing/data-center thesis.

Risks

  • Housing recovery delay: ~half of revenue is residential, and repair/remodel demand stays soft while existing-home sales are frozen.
  • Data-center exposure is real but still a small slice of $31B revenue; the cooling narrative can outrun the numbers.
  • Distribution is structurally low-margin; commodity deflation (copper, PVC, steel) compresses gross profit dollars.
  • Mega-project demand is lumpy and tied to AI capex continuing at current intensity.
  • M&A-driven growth carries integration and multiple-paid risk as bolt-on targets get pricier.

Sources

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