If I could only own 1 UK stock, it would be this

I wouldn’t take seriously any investor who suggests putting all my money in one UK stock. My portfolio contains over 50 investments, including various individual stocks, investment trusts, and index tracking funds.

I think it’s diverse, although some investors have half that amount and many shareholders have more. Everyone has different goals and risk tolerance levels.

Having said that, I can be a useful exercise to think of only one stock I would buy today, if I had to. As an investor, being able to sharpen my focus, enables me to filter out okay stocks for those that I prefer.

This is my choice.

Market sweeper

Ashtead Group (LSE: AHT) has been one of the biggest UK stocks to own for years. The 20-year stock chart tells its own story.

While winners tend to keep winning, there comes a point when they can stop being a stock. Take Amazon stocks, for example. It famously made early investors richer, assuming they were patient enough to buy the stock and then just sit back.

However, the stock has underperformed the market over the past five years. It’s up 30% versus a 48% gain for S&P 500. Meanwhile, Ashtead shares are up 178% in five years.

Turn the small fry

As a reminder, the company rents heavy construction and industrial machinery in the UK and North America. Think excavators, forklifts, power generators, personal protective equipment, and everything in between.

Trade though the Sunbelt Rentals brand, only second United Rentals in the growing US tool rental market. It achieved that position through a series of bolt-on acquisitions.

But the market remains highly fragmented, with these two top dogs commanding less than a third of the overall North American market between them. That leaves plenty of room for further consolidation over the next few years.

There are many benefits to companies renting tools and equipment for projects rather than owning them. They do not have to maintain, insure or upgrade the equipment. But it mostly comes down to cost. It is simply cheaper to rent than to buy.

I understand the business model, and it is profitable.

Ashtead’s latest financial report on revenue

Fiscal year (to April 30)	results ($)	net income ($)
2023 (expected)	$9.57 billion	$1.63 billion
2022	$7.96bn	$1.25 billion
2021	$6.63 billion	$930m
2020	$6.39 billion	$936m
2019	$5.86 billion	$1.03 billion
2018	$4.95bn	$1.29 billion

Growth in prices is reasonable

The stock has a price-to-earnings ratio (P/E) of 19. I think it’s reasonable for a fast-growing company. When I bought shares, it was even cheaper than that.

In addition, Ashtead is quietly developing into a dividend powerhouse. The yield may be low at 1.2%, but the company has raised its payout for 16 consecutive years now. It recently raised its interim dividend by 20%! It’s an added attraction for me.

The most immediate risk I see is a potential US recession, which could hurt the construction industry (and Ashtead’s profits). However, longer term, I see strong tailwinds from the US and UK rebuilding their domestic supply chains after Covid and Brexit. That should support the company’s growth for years to come.