Nov 5, 2026 · 1h 4m
Howden’s US opportunity tests a value investor’s conviction
The Best Business You've Never Heard Of | Todd Wenning
The discussion links a UK retailer’s growth runway and management quality to broader questions about durable businesses, incentives, and technological change.
- 1Howdens’ UK saturation concerns are balanced by new services and a potentially underappreciated US expansion opportunity.
- 2Watsco’s unusually long-term executive compensation structure offers a striking example of incentives aligned with durable ownership.
- 3AI adoption raises unresolved questions about privacy, trust, creative ownership, and the growing value of authentic experiences.
Don't miss
The discussion of Watsco’s unusually long-term executive vesting and compensation structure provides the episode’s clearest example of incentives shaping durable ownership.
The brief
Todd Wenning examines Howdens, a UK supplier of fitted kitchens and joinery, weighing its valuation, possible domestic saturation, and management’s ability to extend the model.
The case for Howdens turns on what comes next: added services such as bedrooms and a larger US opportunity, despite the company’s London listing and liquidity considerations.
Ferguson and Watsco broaden the industrial discussion, with Watsco’s unusually long-term executive vesting and compensation standing out as a model of durable incentives.
The conversation then shifts from businesses to technology, asking whether privacy concerns, scams, and data ownership could slow ordinary consumers’ adoption of AI.
As synthetic content spreads, the group argues that authentic brands and real-world experiences may become more valuable, while fan-created work complicates ownership of major intellectual properties.
What was said on this episode
54 statements · 40 positive · 5 negative · 1 mixed · 8 neutral
Howden Joinery is a large UK company.
“this is a big UK company”
Listen at 2:01
Howdens has one of the strongest annual-report histories.
“They have one of the best annual report histories I've ever seen.”
Listen at 2:39
Howdens operates a trade-only business-to-business model.
“what's unique about their business model is they are business to business and they only deal with the trade customer”
Listen at 3:34
Howdens’ integrated model reduces delays when kitchen components fail.
“that just doesn't happen with Houghtons because they control the entire kitchen”
Listen at 5:05
Howdens’ model enables builders to complete jobs faster.
“they can turn over jobs a lot faster and move on to the next one”
Listen at 5:20
Howdens consistently achieves approximately 60% gross margins.
“it's a very profitable business with a consistent 60% gross profit margins”
Listen at 6:12
Howdens’ normalized-market ROIC is approximately 20%.
“ROIC is probably about 20 in a normalized market, so very strong business.”
Listen at 6:23
Howdens could eventually replicate its UK depot structure in the US.
“could eventually have a similar depot structure in the U.S. as they have in the U.K.”
Listen at 7:59
Howdens’ US expansion would have positive net present value.
“I think it would be a net present value positive for them to move into the U.S.”
Listen at 10:18
Howdens is approaching full penetration in the UK market.
“they're reaching full penetration in the U.K. market”
Listen at 10:43
Howdens has approximately four or five years of UK depot growth remaining.
“They've got about four or five years left of depot growth there”
Listen at 10:46
Howdens’ UK market could support approximately 1,000 stores.
“about a thousand stores”
Listen at 10:53
Howdens could expand from kitchens and bedrooms into bathrooms.
“they could go to bathrooms maybe next”
Listen at 13:48
Howdens is currently attractively priced.
“I think it's a very, very attractively priced right now.”
Listen at 14:52
Howden Joinery shares are attractively priced at current levels.
“I think it's a very, very attractively priced right now”
Listen at 14:52
Howdens could reasonably deliver mid-teens growth during a mid-cycle recovery.
“mid-teens is I think quite reasonable for this stock going into if it recovers back to at least the mid-cycle.”
Listen at 15:03
Howdens’ management team is highly regarded.
“I think very highly of management.”
Listen at 15:18
Howdens’ US expansion is probably its best capital-allocation option.
“I think the U.S. is as good as option of any of those, probably better in my opinion.”
Listen at 18:50
Howdens’ U.S. expansion is probably its best growth option.
“the U.S. is as good as option of any of those, probably better in my opinion”
Listen at 18:51
Ferguson is one of K&A’s top equity-strategy holdings.
“Ferguson I own. It's one of my top holdings in the K&A core equity strategy.”
Listen at 19:28
Watsco has a strong management team.
“but it's a great management team”
Listen at 20:02
Watsco has a strong management team.
“it's a great management team”
Listen at 20:02
Watsco’s executive compensation plan is unusually long-term oriented.
“I do think that in general, it's a very appealing compensation plan because it is relentlessly long term”
Listen at 20:26
Watsco’s compensation plan is unusually long-term oriented.
“it is relentlessly long term”
Listen at 20:33
Watsco’s compensation plan aligns management and shareholders long term.
“I do think that it does align interests quite well for the long term.”
Listen at 20:58
Climate change will make air-conditioning demand increasingly inelastic.
“Air conditioning, you know, unfortunately, due to climate change, is going to become increasingly inelastic.”
Listen at 22:34
HVAC demand will persist for a very long time.
“HVAC is not going anywhere. for a very long time”
Listen at 23:25
The U.S. housing market is currently at a standstill.
“in the U.S., I think we're just at a freezing point right now”
Listen at 24:24
The US housing market is currently effectively frozen.
“we're just at a freezing point right now”
Listen at 24:25
US new-home construction has recently stalled.
“new home builds just froze up”
Listen at 24:53
The US potentially has sufficient total housing supply.
“we have all the supply that we potentially need”
Listen at 28:20
Housing-market constraints may cause people to remain in homes longer.
“it probably forces people to stay in their current location a lot longer”
Listen at 28:52
Lower rates could support remodeling of existing homes.
“You could see some tailwinds from that if rates come down a little bit”
Listen at 29:21
The HVAC distribution industry remains fragmented with substantial opportunity.
“the industry is still very fragmented the hvac distribution business so there's plenty of opportunity”
Listen at 31:30
Watsco’s lack of financial debt helps it withstand higher interest rates.
“watsco has no financial debt so they they can withstand higher rates”
Listen at 31:36
Ferguson is a balanced, diversified distributor.
“So Ferguson is the phrase that the adjective I always use is balanced.”
Listen at 31:51
UK companies entering U.S. industrial distribution have a better track record than consumer businesses.
“there's a much better track record with UK companies coming into the US on an industrial distribution basis and employing a business-to-business model”
Listen at 32:59
UK business-to-business entrants have a better US track record than consumer entrants.
“the track record there is not anywhere near as bad as it is for U.K. companies trying to come to the U.S. and sell to the U.S. consumer”
Listen at 33:47
GPUs become obsolete or unusable within a few years.
“the GPUs are kind of more like snowman, you know, like they're gone. they melt in a few years”
Listen at 41:02
AI infrastructure ultimately requires customers willing to buy compute.
“eventually we're going to need to know who is going to buy all this compute”
Listen at 42:16
AI demand may not grow fast enough to justify upfront infrastructure spending.
“whether the demand can grow fast enough to justify the spend up front like that's a much more difficult question”
Listen at 45:56
The technological singularity is real and may already be underway.
“I think the singularity is real and we're probably in it right now.”
Listen at 46:41
Continued AI progress for five to ten years could produce extremely powerful systems.
“If it keeps on doing this for five or 10 years, I have... I don't know what we'll be doing because it'll be very, very powerful.”
Listen at 47:10
Meta is trying to make AI more user-friendly for everyday tasks.
“I think that's kind of where the meta is trying to do, right, is make it more user-friendly and solve day-to-day.”
Listen at 48:45
Consumer AI adoption remains at an early internet-era stage.
“we're still kind of in that 1996.com era”
Listen at 48:58
AI-enabled scams and spam are becoming increasingly sophisticated.
“the scam, the spam I get, it gets better and better every single day”
Listen at 50:17
Authenticity will become more valuable as AI-generated content proliferates.
“as the world becomes more AI and there's just so much more content being put out there, authenticity is going to matter more”
Listen at 50:42
Authenticity will become more valuable as AI-generated content expands.
“authenticity is going to matter more”
Listen at 50:49
People will increasingly value authentic, human-developed content.
“people will increasingly value things they know that are real and authentic and developed by people”
Listen at 51:05
AI platforms will increasingly specialize in different capabilities.
“we're going to have like these multiple platforms that specialize in different things”
Listen at 54:21
AI technology may continue absorbing functions from separate software tools.
“it keeps absorbing different things”
Listen at 56:26
Fan-created digital content could drive more visitors to Disney Parks.
“if you're Disney Parks, it drives more people to Disney because they want to actually see it in the physical world”
Listen at 57:19
Fan-created derivative content is not wholly negative for Disney’s core IP.
“I don't see it as a complete negative for the core IP when there's people trying to build things off of it.”
Listen at 57:32
Disney should keep its experiences affordable and accessible.
“Disney has to manage that quite carefully, making sure that it's still affordable and accessible for everybody.”
Listen at 59:51
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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