What does "industry consolidation" mean for investors?

Industry consolidation happens when companies in the same sector merge or acquire each other, creating fewer but larger businesses. For investors, this can create opportunities in two ways: stocks of potential acquisition targets might rise in value if they're bought at a premium, while suppliers to these newly enlarged companies may benefit from more stable, larger orders and stronger business relationships.

Why is Home Depot's acquisition of GMS significant?

Home Depot's $4.3 billion purchase of GMS is significant because it represents a major strategic shift in the building materials distribution landscape. This acquisition shows that large retailers are aggressively expanding their focus on professional contractors (rather than just DIY homeowners). It's likely to trigger similar moves by competitors, potentially creating a wave of mergers and acquisitions that could benefit investors in companies similar to GMS.

What's the difference between distributors and manufacturers in this theme?

In this theme, distributors (like BLDR and BXC) are companies that buy products from manufacturers and sell them to contractors and builders. They're potential acquisition targets in the ongoing consolidation. Manufacturers (like MLM, VMC, and OC) make the actual building products and materials. They benefit from industry consolidation differently—by potentially securing larger, more consistent orders from the newly enlarged distributors and developing stronger strategic partnerships.

How might these stocks be affected by housing market conditions?

These stocks are connected to the construction industry, so they're influenced by housing market trends. A strong housing market with new construction and renovations drives demand for building materials. However, this theme has a special angle—even in a softer market, the consolidation trend could create value through M&A activity, cost efficiencies, and improved supply chain dynamics. This gives these stocks potential upside that isn't entirely dependent on housing market strength.

15 handpicked stocks

Pro Contractor Supply Consolidation

This curated selection of stocks represents companies positioned to benefit from the consolidation wave in the professional contractor supply industry. Our analysts have carefully selected these distributors and manufacturers following Home Depot's strategic $4.3 billion acquisition of GMS.

Han Tan | Market Analyst

Published on July 1

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

Builders FirstSource, Inc.

BLDR

Current price

$125.55

As a leading distributor of building materials, Builders FirstSource is a direct competitor to the newly combined GMS/SRS and could be seen as a prime...

As a leading distributor of building materials, Builders FirstSource is a direct competitor to the newly combined GMS/SRS and could be seen as a prime target in further industry consolidation.

BLUELINX HOLDINGS INC

BXC

Current price

$73.44

BlueLinx, a wholesale distributor of building products, operates in the same consolidating market and could become an attractive acquisition target fo...

BlueLinx, a wholesale distributor of building products, operates in the same consolidating market and could become an attractive acquisition target for larger players seeking to expand their distribution network.

Martin Marietta Materials, Inc.

MLM

Current price

$620.06

As a major producer of construction aggregates, Martin Marietta will be a key supplier to the larger, consolidated distributors created by deals like ...

As a major producer of construction aggregates, Martin Marietta will be a key supplier to the larger, consolidated distributors created by deals like the Home Depot-GMS acquisition.

Vulcan Materials Company

VMC

Current price

$304.41

Eagle Materials Inc.

EXP

Current price

$232.62

Owens Corning

Current price

$140.82

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12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

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In 12 months it might be worth:

$1,000.00

+36.08%

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About This Group of Stocks

Our Expert Thinking

Home Depot's acquisition of GMS signals a major shift in the professional contractor supply market. This theme captures companies that may become acquisition targets themselves or benefit as suppliers to newly enlarged distribution giants. These stocks offer exposure to both M&A potential and the broader construction industry momentum.

What You Need to Know

This theme includes two main types of companies: building material distributors that could be acquisition targets, and manufacturers that supply essential construction products. Performance is tied to both M&A activity and the health of housing and construction markets, making it a tactical investment with cyclical elements.

Why These Stocks

These companies were selected based on their strategic positioning in the contractor supply value chain. Our analysts identified distributors similar to GMS that could attract buyers, and manufacturers likely to benefit from more streamlined ordering and enhanced relationships with larger distribution partners.

Group Performance Snapshot

36.06%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 36.06% over the next year.

11 of 15

Stocks Rated Buy by Analysts

11 of 15 assets in this group are rated Buy by professional analysts.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🔍

M&A Premium Potential

Building material distributors in this group could become acquisition targets themselves, potentially commanding significant premiums as larger players compete for market share in the professional contractor segment.

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Industry Power Shift

Home Depot's acquisition of GMS marks a turning point in how construction materials reach contractors. These companies are positioned to benefit from the changing landscape through larger orders or potential buyouts.

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Supplier Pricing Strength

As distribution consolidates, key manufacturers gain leverage through more strategic relationships with fewer, larger customers. This can lead to more stable orders and potentially improved pricing power.

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