This CEO’s last company was a millionaire. Could his next venture be even bigger?

Brad Jacobs may not be a household name among retail investors, but Jacobs has one of the best track records of any CEO working today.

Jacobs’ first US company was United Waste Systems, which delivered a 55% compound annual rate of return from 1989, when it was founded, until 1997, when it was sold to the company that became Waste management. At the time, it was the fifth largest solid waste management business in North America.

After that, Jacobs co-founded United Rentals and followed a similar roll-up strategy to deliver superior returns to the market and become the leading equipment rental company.

In 2011, Jacobs purchased a trucking brokerage that would become XPO Logistics for $150 million. XPO became the seventh best stock of the decade on wealth 500, earning over 3,000%. XPO split two other businesses, the RXO truck brokerage and GXO Logisticsa contract logistics business that collectively generates more than $20 billion in annual revenue.

In his career, Jacobs has made more than 500 acquisitions, giving him a wealth of experience to draw on as QXO looks to make its first deal.

Image source: Getty Images.

Jacobs’ next project

Last December, Jacobs announced his next venture. Appointed QXO (QXO -0.71%)he plans to implement the same roll-up strategy in building product distribution that has worked so well in other industries.

Like the other industries he targets, building product distribution is a massive and fragmented industry with an estimated $800 billion addressable market. There are 7,000 construction supply companies in North America and 13,000 in Europe. Over the next decade, QXO aims to build an industry-leading company with $50 billion in revenue a decade from now. The industry has also been growing steadily at a compound annual growth rate (CAGR) of 7% over the past five years and should benefit from a housing shortage of approximately 4 million homes in the US and the aging housing stock.

The company has raised $5 billion to start with a major acquisition or two, but QXO has yet to pull the trigger. Acquired SilverSun Technologies to become a publicly traded entity. After originally planning to decommission SilverSun, QXO later decided to keep it.

The QXO Handbook

In a number of ways, building materials distribution makes a lot of sense for Jacobs and his team, as the business is fundamentally one of logistics and transportation, where the challenge is to move products in a timely and efficient manner while taking advantage of sales opportunities crossed. , and building a warehouse network and a transportation fleet to go with it.

Like Jacobs’ previous ventures, building materials distribution also presents QXO with an opportunity to disrupt the market and add value through technology, as chief investment officer Mark Manduca told The Motley Fool: “It’s absolutely ready for technological innovation”.

Is QXO a buy?

The building materials distribution industry has already produced a number of stock market winners, although these stocks are not receiving nearly as much as those in other sectors. As you can see from the chart below, five of the stocks generally considered industry leaders outperformed S&P 500 in recent years.

BLDR data by YCharts

Since QXO has yet to make an acquisition, it’s hard to judge the company’s prospects, but Jacobs’ track record speaks for itself, and the chart above reminds us that the sector has a history of outperforming the S&P 500.

With $5 billion in its war chest, QXO looks set to make an acquisition or two that could immediately make the company a major player in the industry, unlike previous ventures under Jacobs when it started smaller.

The stock is risky at the moment, but could rise on a well-received buy. Longer term, Jacobs’ roll-up expertise and construction supply opportunities bode well for the company. Buying a piece of stock now could offer upside potential for years to come.