We also bought shares of former position Generac Holdings, Inc. (GNRC, Financial), a leading global manufacturer of powergeneration equipment. The company has an unmatched distribution network and product portfolio and enjoys strong brand advantages. We believe this creates a wide moat for this niche business which commands a 75% market share in the North American residential market. Historically, growth has been limited due to a lack of awareness around the benefits of having a home standby generator, as well as its high price point. More recently, however, elevated power outage events, both weather-related and due to aging infrastructure, have tipped the scales of awareness in both the residential and commercial markets, which should result in a long-runway of market penetration-led growth, margin expansion and free cash flow generation. The stock was a pandemic darling but has since traded off substantially giving us an opportunity to acquire shares in this unique, high-quality business.
From John Rogers (Trades, Portfolio)' Ariel Fund third-quarter 2022 commentary.
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