In the course of our weekly research, we found a theme worth talking about.

Some notable long term gains have been notched in the past by companies that consolidated a highly fragmented industry over a period of decades. For example, many years ago, it seemed that most towns had two or three trash hauling companies. There were thousands of them across the country.

Now, a large fraction of our garbage is handled by just a few companies. Each of the giants grew faster than the overall economy, or the waste removal industry, through acquisition of companies and contracts as they consolidated the industry.

There are reasons why this happens:

• A bigger player spreads overhead over a larger operation.
• Larger scale might mean lower cost for equipment and supplies.
• Resources may be shared among different locations.

All of these things and more boost profits, or reduce costs, or both.

This is why we are excited to find the largest player in a highly fragmented industry available at what we believe is a favorable price. We cannot know the future, but thinking that the big will get bigger seems promising. Consolidation has been a durable feature of modern economies.

We own the largest player in each of three fragmented industries, companies that are growing their share of the market. Values bounce around in the short run, as with any long term investment. There are no guarantees.

Clients, if you would like to talk about this or anything else, please email us or call.

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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.