We increased our position in Badger Daylighting Ltd. (TSX:BAD), a provider of custom-made trucks that use pressurized water and powerful vacuums to excavate in areas with buried pipes and cables. These “hydrovac” trucks are much safer than mechanical equipment and more efficient than manual digging. Hydrovac truck demand is growing rapidly, as oil and gas companies use them to build new wells and pipelines, and as utility companies increasingly use them to maintain underground infrastructure. Badger is meeting this demand by building more trucks and adding more service locations in the U.S. and Canada. With over 800 trucks and 110 locations, Badger is by far the largest provider of hydrovacs in North America, competing mostly against local mom and pops. This size advantage and the company’s manufacturing capabilities allow Badger to enjoy economies of scale and lower operating costs. Given the strong tailwinds of capital investment by the energy and utility industries, along with increasing safety pressures around accessing and maintaining existing infrastructure, we believe demand for Badger’s services should continue growing nicely. (Josh Saltman)
From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.
