TIVP017: Comfort Systems (FIX): Blue-Collar Compounder w/ Shawn O’Malley & Daniel Mahnke

The Intrinsic Value Podcast - The Investor’s Podcast Network

The Investor's Podcast Network

Investing, Education, Business

4.6 • 593 Ratings

🗓️ 27 April 2025

⏱️ 76 minutes

🔗️ Recording | iTunes | RSS

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Summary

Shawn O’Malley and Daniel Mahnke break down Comfort Systems (ticker: FIX), a specialty contracting company providing installation and maintenance services for the electrical, HVAC, and plumbing needs of schools, hospitals, apartment buildings, restaurants, data centers, manufacturing facilities, and a range of other customers. Comfort Systems is something of a serial acquirer, snapping up regional contracting companies at attractive prices and plugging them into a broader holding company structure, where management at the top can handle capital allocation across each of the subsidiaries. In this episode, you’ll learn how Comfort Systems has scaled across the country and diversified its operations, how the business has used the serial acquirer playbook to compound its intrinsic value for shareholders, why the company is benefiting from major tailwinds related to AI and manufacturing onshoring in the U.S., plus so much more! Prefer to watch? Click here to watch this episode on YouTube. IN THIS EPISODE, YOU’LL LEARN 00:00 - Intro 09:59 - Why Comfort Systems has benefited from a manufacturing boom in the U.S. 10:54 - How Comfort Systems is tied to the AI boom 14:40 - What the company looks for in acquisition targets 20:32 - How Comfort Systems increases its intrinsic value by supporting its subsidiary contracting businesses 35:28 - Why mechanical contracting is such a localized business 40:45 - Whether Comfort Systems can continue to compound returns going forward 1:00:13 - How to calculate returns on incremental invested capital and why it matters for shareholders 1:02:41 - What is Comfort Systems’ intrinsic value per share 1:06:44 - Whether Shawn & Daniel add FIX to The Intrinsic Value Portfolio And much, much more! *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Get smarter about valuing businesses in just a few minutes each week through our newsletter, The Intrinsic Value Newsletter. Check out the Yahoo Finance Article on FIX. Fix’s latest 10K filing. CEO Brian Lane’s 2022 interview on the Compounders Podcast. John Huber on calculating returns on incremental capital. Chris Mayer’s book: 100 Baggers. Check out our previous Intrinsic Value breakdowns: Nintendo, Airbnb, AutoZone, Alphabet, Ulta, John Deere, and Madison Square Garden Sports. Check out the books mentioned in the podcast here. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | Instagram | Facebook | TikTok. Browse through all our episodes (complete with transcripts) here. Try Shawn's favorite tool for picking stock winners and managing our portfolios: TIP Finance. Enjoy exclusive perks from our favorite Apps and Services. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: CFI Education Airbnb Connect with Shawn: Twitter | LinkedIn | Email Connect with Daniel: Twitter | LinkedIn | Email HELP US OUT! Help us reach new listeners by leaving us a rating and review on Spotify! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

Transcript

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0:00.0	Company CEO, Brian Lane, has said there's a long runway to continue making attractive acquisitions, one that extends well beyond his lifetime and his word.
0:09.6	Many of the businesses they acquire are run by founders who have maybe recently turned 60 and are thinking about retirement.
0:15.9	In the old days, their kids might have taken things over, but that's increasingly less common and has created an
0:22.0	opportunity for companies like comfort systems to come in and enable people to sell the business
0:27.1	they've been building over a lifetime to a trusted partner with a good reputation who they
0:31.6	know won't run in their life's work into the ground.
0:47.0	They say borrowing businesses are the best investments, and in many cases, that is true.
0:53.6	Warren Buffett has consistently beat the market averages by doing just this, buying wonderfully boring yet profitable businesses
0:56.1	at fair prices, either by purchasing shares in the stock market or by acquiring entire businesses
1:02.5	as operating subsidiaries.
1:05.0	Like Berkshire Hathaway, Sean's company pitch today, Comfort Systems, has also used
1:10.2	a holding company structure to allocate
1:12.4	capital toward attractive businesses, specifically in the niche area of mechanical contracting.
1:19.2	This primarily includes electrical, plumbing, and HVAC installation and maintenance services.
1:26.7	And Comfort Systems has turned itself into a nationwide company
1:30.6	for making over 40 acquisitions in the last two decades,
1:34.8	enough that you might even call it a serial acquirer.
1:38.0	I don't want to steal your thunder though, Sean.
1:40.4	I'm just going off what you've already told me about the company.
1:43.5	You can probably explain more precisely what listeners will find most interesting about this company.
1:50.5	All right, now it's your turn, Sean.
1:52.2	Tell us about this wonderfully boring compounder.
	...

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