Fix You
"When you try your best, but you don't succeed. When you get what you want, but not what you need."
65 degrees Fahrenheit.
That’s how I want my bedroom to feel at night when I sleep.
When traveling abroad, I have to Google the Celsius numbers. (I’m not a scientist!)
Not having to battle for control of the thermostat is comforting.
This month, I began reading up on Comfort Systems ($FIX).
A quick description from ChatGPT:
Comfort Systems USA is a mechanical contractor focused on HVAC, plumbing, piping, and related building systems services across commercial and industrial markets.
A little more color from The Motley Fool:
Some businesses have trouble swiftly executing on tangible new opportunities when they arise -- not so with Comfort Systems (NYSE: FIX), which employs more than 18,000 skilled workers in the mechanical, electrical, and plumbing (MEP) trades. Comfort Systems focuses mostly on industrial, manufacturing, and institutional buildings, in both the construction and servicing stages. The business is coasting on quite the wave: Revenue increased by 35% in Comfort Systems’ most recent quarter to $2.5 billion, while free cash flow surged 83% to just over $550 million.
Extremely strong demand in construction is pacing the company’s outsize results, driven by -- you guessed it -- data center construction projects, where Comfort Systems’ mechanical and electrical expertise make it a favorite in bids versus competitors. Data center wins are also behind a recent surge in Comfort Systems’ backlog, which reached $9.4 billion as of its most recent reporting date, representing more than a year of revenue.
But it would be a mistake to attribute Comfort Systems’ growth to AI alone. The company is participating in other domestic expansion stories, and is winning projects from pharmaceutical giants as they race to bring more GLP-1 class drug manufacturing plants online. Comfort Systems has developed wide expertise across many disciplines through its acquisitions strategy. A highly cash-generative business, the organization uses roughly 75% of its free cash flow to acquire smaller MEP groups.
A good quote from the season premiere of HBO’s “Industry” last night:
“In America, your story begins when you start telling it.”
The laziest, shortest story I can say of Comfort Systems is that its stock price is up 1,800% over the past five years.
That’s very good.
The company was founded in 1997 and is now worth $36 billion.
I don’t usually miss this type of growth, though it’s probably because it operates in a market that has not traditionally been sexy.
Unfortunately, oftentimes, the noise from crypto, meme stocks, big tech, anything involving Elon Musk, and AI takes up too much airtime.
Ryan Reeves on Twitter shared an excellent response from the company’s CFO to an analyst’s question on capital allocation on the last earnings call:
Well, that’s never the worst thing in the world. There are worse alternatives to accumulating cash. But we haven’t changed our capital allocation thinking since 2007. We will –– to the extent we can find opportunities that we have conviction around, we will deply most of our cash doing acquisitions. We will continually buy back our shares using a portion of our free cash flow, and we get aggressive on that when we feel like the stock has dipped to –– relative to our prospects.
So for example, when it dipped earlier this year, we spent $100 million in a couple of weeks buying shares. And then we –– one point you might be making is there’s so much cash now. Is it realistic for us to deploy it into acquisititions? And I think the answer is we’ve faced that problem on a couple of stair steps in our cash over the last few years. So far, our reputation as an acquirer and our commitment to great outcomes for the people we buy have allowed us to find good opportunities to deploy our cash.
I like a management team with cash that knows how to use it (and when not to use it).
The “data center construction” narrative is likely to consume the airwaves this decade.
Comfort Systems doubled its market cap in 2025. It had doubled in 2024. 2026 is far from a guarantee.
I don’t chase charts. And many investors got scared in the first quarter of 2025 when most stocks took major hits, including Comfort Systems, which almost got cut in half.
But things could be heating up, in a way, for the company’s long-term growth.