The Best Business You've Never Heard Of | Todd Wenning

Howden Joinery Group Plc

• Todd Wenning · KNA Capital ManagementBullish

  Howden should build a US trade-kitchen network; the untapped option could be as large as its UK business.

  Howden's trade-only, depot-based model is highly profitable (about 60% gross margin, roughly 15% EBIT, about 20% ROIC) and a decentralised US kitchen market is poorly served. The US depot model worked well in its early pilot, with one depot matching mature UK stores before the business was pulled out around 2005-06. UK growth is nearing saturation at about 1,000 stores in four or five years. Todd estimates that a conservative US build-out would be NPV-positive and says the business could match its UK depot count in the US over ten to twenty years. He argues the firm's £370m DIY Kitchens acquisition shows management needs growth, and that the same capital in the US would be a better option. He also notes a US facility would let it design products in imperial units, and that Renz's bankruptcy reflects a showroom model, not Howden's industrial-park depots.

  “They could have at least the same number in The US over the next ten, fifteen, twenty years. So it looked to me like a huge option value that's just currently not even being considered... for Howdons.”at 8:01

• Todd Wenning · KNA Capital ManagementBullish

  Howden is attractively priced at about 15-16x earnings, with mid-teens growth implying a PEG near one.

  Howden trades at roughly 15-16x earnings and a mid-to-high single-digit free cash flow yield. The market prices in low growth because UK depot growth is nearing saturation. Todd argues the stock is a PEG of about one if it grows 15-16% for a couple of years at a 15x multiple, which he considers very attractive. The UK housing market has been stagnant since Brexit under high rates and low turnover, with France also weak. He expects earnings to recover to mid-cycle as rates normalise and housing turnover improves, and sees mid-teens growth as reasonable. Continued add-on products like bedrooms and possibly bathrooms also support the growth outlook.

  “You're looking at a peg potentially at one, right, where it's growing 15, 16% for a couple of years at a PE of [15x]. So I think it's very attractively priced right now.”at 14:42

The Walt Disney Company

Across the shows: 7 speakers in other episodes, 6 bullish and 1 bearish calls, past 30 days

• Tobias Carlisle · Acquirers Funds / The Acquirers PodcastBullish

  Disney's brand loyalty is strong, though he thinks it has struggled to create new IP.

  On a recent visit to Disney, Carlisle saw far more adult couples than families with kids, roughly ten to one. Many visitors were already wearing Disney merchandise when they arrived, and he judged them repeat customers, which made the brand look like a cult. He then says Disney has struggled a little with new IP and he does not know what it has. The brand strength is his main evidence, and the new-IP concern is a weaker, unsupported caveat.

  “everybody's in Disney merch. Like, they're already dressed in it when they arrive.”at 58:12

• Todd Wenning · KNA Capital ManagementBullish

  Disney's nostalgic IP and parks are durable, but pricing must keep families able to enter.

  Wenning owns Disney. He argues that Disney's 1980s and 1990s resurgence built a generation that now has discretionary income and wants to relive childhood. Fan fiction and AI-made derivative content drive people to the parks to experience the IP physically, so he does not see it as a negative for the core IP. He also believes that as AI floods the world with content, authenticity matters more, which supports Disney. The caveat is that high prices push families away. Disney has to keep replenishing the kids' entry point and keep the experience affordable and accessible, because nostalgia passes between generations only if new children are brought in.

  “those people who are roughly our age now have discretionary income, right? And so all of a sudden you want to go relive your childhood, and what a great way to do that.”at 58:50

Watsco

• Todd Wenning · KNA Capital ManagementBullish

  Watsco's HVAC replacement demand is inelastic and unaffected by AI, so the beaten-down stock is a buy.

  Todd recently added Watsco, the largest US HVAC distributor, mainly in the Sun Belt. He says air conditioning becomes more inelastic as climate change increases, since a broken HVAC system must be fixed or the homeowner moves. He sees this end-product demand as unchanged by AI, which may change the logistics tech stack but not HVAC demand. He says the stock has been beaten up on fears about the housing cycle and the fading post-pandemic tax credit replacement cycle. He also points to a family with a major ownership stake and a long-term, relentlessly long-term compensation plan where executives only vest at retirement, which he sees as aligning interests well. He describes the business as having no financial debt.

  “And so to me, that is a no brainer in terms of something that's not going to change.”at 22:55

Ferguson Enterprises

• Todd Wenning · KNA Capital ManagementBullish

  Ferguson's balanced mix of residential, commercial and waterworks distribution makes it a top holding.

  Ferguson is one of Todd's top holdings in the KNA core equity strategy. Its HVAC business is only about 10% of revenue, and it is the second-largest US HVAC distributor after Watsco. The rest is largely plumbing, split about 50/50 between commercial and residential. Todd cites its strength in data center build-outs and in waterworks, where new developments need sewer and water lines. Ferguson is one of the largest players there alongside Core & Main. Its track record as a UK-acquired business that later relisted in the US shows a business-to-business, industrial-distribution model can succeed in the US, unlike UK consumer brands.

  “They're the second largest HVAC distributor in The US after Watsco, and that's only 10% of their business. So they are extremely, extremely diversified.”at 31:54

CoreWeave

Across the shows: 81 speakers in other episodes, 23 bullish and 87 bearish calls, past 30 days

• Jake Taylor · Farnam Street Investments / The Acquirers PodcastBearish

  CoreWeave's cash comes mostly from financing, not outside customers, so the build-out is fragile.

  Taylor splits CoreWeave's last six months into two buckets. It had $3.7B of net operating cash flow, which he treats as outside money, the 'food'. It also had $14B of financing cash flow, which he treats as internal circulation inside the 'AI heat'. He compares the setup to the Disneyland loop, where capital comes in one door and promotion comes out the other. The difference is that GPUs depreciate in a few years, so the financing has to pay back sooner. He says it is still unknown whether customers will pay enough for the computing to make the investment work.

  “they had 3,700,000,000 of net operating cash flow in the last six months and we might call that food. That's actually coming from the outside. And then there's $14,000,000,000 of cash flow from financing”at 41:30

NVIDIA

Across the shows: 72 speakers in other episodes, 68 bullish and 25 bearish calls, past 30 days

• Jake Taylor · Farnam Street Investments / The Acquirers PodcastBearish

  NVIDIA's own $36B compute commitments are a warning sign, not healthy outside demand.

  Taylor says NVIDIA sells chips to CoreWeave, invests $2B in CoreWeave stock, and has promised to buy any compute CoreWeave cannot sell to others through 2032. He cites NVIDIA's $36B of capacity commitments as a number to watch. Commitments that outside customers absorb are healthy, like a nourishing meal. Commitments NVIDIA has to take on itself are, in his analogy, NVIDIA warming its own hands. He argues the real question is whether end customers will pay enough for the compute to justify the machines, power, financing and replacement capex, since GPUs burn out in about five to seven years.

  “when NVIDIA is the one who has to take it on, then that's basically kind of the equivalent of NVIDIA breathing on their own hands to stay warm.”at 42:02

Waymo

Across the shows: 5 speakers in other episodes, 5 bullish and 0 bearish calls, past 30 days

• Todd Wenning · KNA Capital ManagementBullish

  Riders' fear of robotaxis fades after one ride, so Waymo adoption should follow.

  Wenning says many people are apprehensive about riding Waymo for the first time and do not trust a machine to drive them or their family. He argues that once people actually ride, they find it is as safe as, or maybe safer than, the average driver. He compares the challenge to AI adoption more broadly, where getting over the initial hump of trust is the key barrier. The argument is that the trust barrier is a first-ride problem that resolves with experience.

  “But then once you do it, once you ride in it, you're like, oh, this is just as safe as... Maybe more than the average driver.”at 49:52

Nintendo Co.

• Todd Wenning · KNA Capital ManagementBullish

  Nintendo is a durable intergenerational asset, and he owns it on authenticity thesis.

  Wenning says he owns Nintendo. He argues that a few assets, like sports, Disney and increasingly Nintendo, let grandparents share something with their grandchildren. As people his age get older, they keep playing Nintendo games and can share them with their own grandchildren. This ties to his thesis that AI-generated content will push people to value authentic, human-made work, so the human-created IP keeps its appeal.

  “And increasingly, Nintendo, because as people our age get older, we'll continue to play, and we'll be able to do that with our grandchildren one day, hopefully.”at 59:34

US housing

• Todd Wenning · KNA Capital Management

  US housing is frozen: 7% mortgages and remote-work changes make affordability very hard.

  Todd says the US housing market is at freezing point, with things not moving. With 7% mortgages at current asking prices, he questions how buyers above a certain price level can afford homes. New home building has frozen because builders had used mortgage rate buydowns, but that only worked if buyers would live further out. With remote work less viable, people need to live closer to cities, which makes newer builds less attractive and pushes prices up. He says homeowners on 3% mortgages are staying put, which forces remodeling instead of moving, and he sees tailwinds for remodeling if rates fall.

  “In The US, I think we're just at freezing point right now. There's just things aren't moving... with 7% mortgages at the current asking prices.”at 24:22

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Lower rates won't unfreeze US housing; transaction volumes are near multi-decade lows.

  Tobias is skeptical that cutting rates will flood the housing market back. Realtors and industry commentators assume high rates are the problem, but he thinks the math does not work because returning to long-run rates does not improve profitability enough. Transaction volumes are below the credit crisis trough, and comparable volumes have not been seen in about thirty years, when the population was much smaller. He sees the freeze as a hangover from post-pandemic stimulus, now about six years on, and says it is not thawing anytime soon.

  “I just don't think the math [works] when you look at it because just to go back to those long run rates doesn't really improve profitability enough.”at 27:22

Private equity

• Todd Wenning · KNA Capital Management

  PE-backed HVAC and plumbing roll-ups are nearing exits, so competitive pressure should ease.

  Todd says the 2021-22 wave of HVAC and plumbing roll-ups by PE firms is reaching its exit window now. Ferguson had remodeled its distribution centers to serve both HVAC and plumbing because roll-ups increasingly offered both. Earlier, Chemed's Roto-Rooter faced PE rivals bidding up Google clicks and using plumbing as a loss leader for HVAC. As those investments near sale, Todd expects PE-backed players to trim back spending and focus on profitability. The HVAC distribution industry is still very fragmented, so there is still room for growth.

  “But you think about the exit window for a lot of those investments right about now.”at 30:37

AI bubble & tech valuations

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  AI's use case is real, but demand may not justify upfront spend, so a dot-com-style bust is likely.

  Carlisle separates two questions. The AI use case is real. Demand, and whether it can grow fast enough to justify the spending up front, is much harder to estimate. He expects a boom-bust-boom pattern in the stock market like the dot-com era, where the early builders pay the price. The pioneers may not make it to the other side even though the technology ultimately delivers. He says the willingness to pay for AI, and whether customers use the rides, are still open questions.

  “You can see on the stock market like a boom and bust and then a boom again, like in a .com one point o style scenario where we get a little bit ahead of our...”at 46:00

AI: overall outlook

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  AI capability is improving extraordinarily fast; he believes we are already in the singularity.

  Carlisle says he uses AI constantly and has built AI features into his website. He argues that AI lets solo business owners and entrepreneurs act like a smart MBA-level assistant that executes tasks, which he calls a game changer. He points to the rate of change in AI capability from one year to the next as extraordinary, and to ideas that were science fiction only decades ago. He says he is a big believer and that if the pace holds for five to ten years, the outcome will be very powerful. He hedges that he does not know what that will mean for work.

  “I feel like it's here, and the rate of change in the power of the AI systems from last year to this year is extraordinary.”at 46:58

Consumer AI products

• Todd Wenning · KNA Capital Management

  Mass consumer AI adoption is still early, held back by privacy fears and scams.

  Wenning says AI helps finance professionals and small business owners cut data work and time burden. He is unsure how the average person will use it, and notes his wife has barely touched it. He compares the moment to the 1996 internet, when people were still wary of putting a credit card online. He is skeptical about sharing personal information with AI products. He says AI has been a boon for scammers, with spam getting better every day, and that this makes people more apprehensive. He thinks Meta is trying to make AI more user-friendly and solve day-to-day problems, which is the hurdle to clear.

  “I think it'll be interesting to see how the average consumer adopts it... But I don't know how the average person is going to use it.”at 48:18