If I mentioned Badger Daylighting to you, you’d probably wonder what I was talking about. Moonlighting is having a second job at night, so you might deduce that badger daylighting is a nocturnal woodland creature taking on additional employment during the day to earn extra cash to support the rest of the badger family. Surprisingly, that’s not it. Badger Daylighting is a Canadian company that does… well… daylighting. You might not know what daylighting is in this context – don’t worry, you’re not alone.

Daylighting is exposing underground pipelines and utilities to the light of day through excavation. Badger Daylighting does this through hydrovac excavation, which probably also needs some explanation. Hydrovac excavation uses a specialised truck, which makes a relatively small hole in the ground and injects highly pressurised water to liquefy the soil. At the same time, this slurry-type mixture is extracted into the truck using a powerful vacuum system. Pretty cool, eh?

This method has a number of benefits over the traditional approach of digging a big hole manually with a spade or a digger. Firstly, it is faster – much faster. It’s also much safer and much less destructive. When utility lines or gas pipes are involved, it’s obvious why you’d want to avoid burrowing down with a big metal digger. Not only is site safety improved but the surrounding infrastructure is protected, as studies suggest that 20% of instances of damage to underground utility lines are caused by manual or mechanical digging. Finally, hydrovac excavation is much more versatile, as it can operate in lower temperatures and in difficult to reach sites (the trucks can be located as much as 600 feet away from the hole).

Badger Daylighting started out by providing services to the oil and gas industry. However, the advantages over traditional methods meant it began to spread to other applications such as urban infrastructure and construction, rapidly expanding the size of its total addressable market – a key thing we look for when researching a stock. This increased range of applications brought huge growth in Canada and it is now looking to achieve similar growth in the US, hoping to double the size of its business there over the next three to five years. This is potentially an even larger market for hydrovac excavation and is at a much earlier stage of development. Many people still don’t know what daylighting is and that’s part of the beauty of the opportunity.

In terms of competition, Badger is by far the market leader in North America and it dominates in terms of market share, experience and equipment. It even manufactures its own trucks, meaning it controls the build quality and can continually improve the design. It may not be the cheapest method but it is the go to player. The way I think about it is this: if I suddenly had a load of rats running around my kitchen, I wouldn’t call a load of different pest control operators to get quotes – I’d phone the recognised brand and get them in as quickly as possible. This is the role Badger plays when the need arises for urgent and safe excavation. They have challenged the traditional way of excavating and come up with a much better way to approach the issue, thus disrupting the field. This disruption is another thing we look for when researching companies.

Continuing to raise awareness of the advantages of hydrovac excavation in the US is key to sustained growth for the company and if it is able to follow the same blueprint and achieve the same success as it did for its operations in Canada, then the next few years should be prosperous ones for Badger.

Lastly, you might be thinking that although I’ve explained the daylighting bit, I’ve still not explained where the badger came from. One suggestion is that if you turn one of their trucks upside down it looks like a badger. I can’t be sure of this but like hydrovac excavation itself, it sure makes for a compelling story.


Opinions and views from the Equities team at Kames Capital are not an investment recommendation, research or advice and should not be considered as such. Content discussing investment strategies and stocks is derived from and solely relates to the investment management activities of Kames Capital.

About the author

Neil Goddin is Head of Equity Quantitative Analysis and also has joint responsibility for managing funds within the Global Equities team. In addition to investment management responsibilities, he leads the team responsible for building and maintaining the Kames equity investment screen, which is used across the equity team, and advising on optimising risk levels in the funds. Neil’s role differs from most typical quant professionals as he sits within the fundamental team, has joint responsibility for managing funds and is an integral part of the equity team; rather than the more traditional model where quant teams sit separately, away from investors. Neil joined us in 2012 from LV Asset Management where he was Head of Investment Risk. Prior to that, he worked for WestLB Mellon Asset Management and Deutsche Asset Management in various risk-management roles. He has 19 years’ industry experience and is a Certified Risk Manager by the Global Association of Risk Professionals (as at 30 September 2018).

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