Skilled Trades Supply Squeeze
Meredith@meredithwoodclark
−0.4%
since Sep 15
The idea
Skilled trades are the scarcest input in the economy right now, and demand from aging homes, electrification, and the data center and factory boom just keeps stacking up. So I built a basket around the whole stack: the roll-ups actually doing the commercial and residential work, the distributors and equipment makers every contractor buys from, and the software running their back offices. It's broad on purpose since I'm not betting on one contractor winning, I'm betting the labor squeeze lifts the entire chain over years, with 7% in cash to add if things sell off.
What it owns
- Companies that employ electricians, HVAC technicians, and pest crews at scale capture pricing power when skilled workers are scarce. · EMCOR GroupFields electrical and mechanical crews for major construction jobs including data centers and factories, with growing backlogs and record margins as evidence of pricing power in tight labor markets., Comfort Systems USAEmploys thousands of HVAC and mechanical technicians and relies on their scarcity to support backlog growth and margin expansion., RollinsConsolidates small pest control operators and maintains their technicians on recurring routes, generating steady revenue from route density and pricing increases., IES HoldingsProvides electrical contracting services to data center builders, with direct exposure to AI-driven construction activity., FrontdoorSits between homeowners and contractors, collecting warranty fees while dispatching scarce technicians to aging homes., Limbach HoldingsMaintains and upgrades mechanical systems in existing buildings through recurring service contracts, benefiting from aging infrastructure., Rentokil InitialOperates recurring pest control routes globally with trained technicians difficult to replace, similar to the domestic consolidation strategy.32%
- Parts and supply distributors collect revenue on every job regardless of which contractor performs the work. · WatscoDistributes HVAC parts to nearly every air conditioning repair and replacement in its markets, collecting revenue from the entire repair cycle., Ferguson EnterprisesSupplies plumbing and waterworks products to professional contractors across residential and commercial projects., Pool CorpDistributes chemicals and parts to pool technicians on a recurring basis tied to the installed base rather than new construction., Core & MainSupplies pipes, valves, and meters for water infrastructure projects, serving the aging municipal asset replacement cycle with public funding., SiteOne Landscape SupplyDistributes landscape supplies nationally to professional contractors whose demand remains consistent regardless of job competition.22%
- The machines being installed, from rooftop HVAC units to electrical components, face their own supply constraints. · Trane TechnologiesMakes the commercial HVAC systems that data centers and factories require, with order books reflecting construction spending levels., Lennox InternationalSells residential HVAC equipment for replacements in aging homes where new units are necessary, relying on pricing power as labor costs rise., Carrier GlobalManufactures heat pumps and electrification equipment for residential and commercial applications, benefiting from the transition away from fossil fuels., HubbellMakes electrical components and grid equipment in genuine shortage as electrification and data center expansion strain power infrastructure.18%
- Aging housing stock and chronic underbuilding keep the pipeline full for repair and installation work across all trades. · Home DepotSells to professional contractors through a fast-growing segment, capturing spending from the same trades experiencing labor scarcity., Builders FirstSourceSupplies lumber and prefabricated components to homebuilders, with prefab products designed to offset scarce framing labor., Toll BrothersBuilds homes in a market with chronic housing shortage, keeping all trades continuously busy with new construction work., TopBuildInstalls insulation at national scale where scarce crews and rising energy codes keep adding work across new and retrofit projects.14%
- When labor is the bottleneck, tools that help crews handle more jobs become essential business expenses. · ServiceTitanProvides software that runs plumbing, HVAC, and electrical shops, with growth tied to contractor professionalization and spending., Paycom SoftwareHandles payroll for hourly workforces, seeing more hiring complexity and wage management needs as skilled trades labor tightens.7%
- Cash7%