WillScot is a market share leader in modular offices for construction sites and is seeing improved demand trends (e.g., datacenters). The company has struggled over the past year but may be turning the corner, as indicated by the sharp rebounds in its performance. WillScot exemplifies a niche but essential business model that can be discovered in the smaller cap segment of the equity market, highlighting its growth potential.

At its current price, we believe WillScot represents the most asymmetric opportunity in the portfolio. Following a ~40% decline from our cost basis, the stock has derated significantly from a ~10x TEV/EBITDA (2024E) multiple to ~7.5x (2025E), and a ~7% free cash flow yield (2024E) to ~13% (2025E). At this valuation, the market is pricing WillScot as a business in secular decline. This stands in stark contrast to our view of WillScot as a compounding industrial services franchise with a dominant market position. The market’s impatience with WillScot’s lack of immediate earnings visibility has created an opportunity to own a high-quality 'tollbooth' on North American construction and infrastructure at an extremely attractive valuation.

WillScot Holdings is the dominant provider of turnkey space solutions in North America, offering modular offices, temporary classrooms, and portable storage containers. The company has consolidated a fragmented industry, enhancing competitive behavior and creating scale advantages that lead to pricing power. Management is focused on optimizing operations to drive more value from their scale. Despite being in a mature industry, WillScot is expected to continue growing through bolt-on acquisitions and expanding into adjacent offerings. The firm has added to its position, making it a top five holding in the portfolio.

WillScott Holdings (WSC) has faced challenges due to difficult end markets, but we have maintained our position because the unit economics of the mobile storage business are attractive. Management effectively utilizes the strong free cash flow (FCF) to buy back stock, reducing the share count from 230 million to 182 million over the past five years. Despite misjudging the market's appetite for WSC shares, we believe in the business model and management team, and we see potential for significant appreciation in the stock over the next few years.