1. Wesco International Inc. (NYSE:WCC)
Forward P/E Ratio as of March 5: 12.03
Number of Hedge Fund Holders: 62
Wesco International Inc. (NYSE:WCC) is a business-to-business distributor that delivers comprehensive supply chain solutions across electrical, communications, and utility sectors. It offers a wide array of products and services to customers globally.
In Q4 2024, sales in the Data Center Solutions segment (within its Communications and Security Solutions business unit) surged by over 70% year-over-year. This was driven by demand from various data center customers, which include hyperscale, multi-tenant, and enterprise clients. Consequently, data center solutions accounted for ~40% of the CSS segment’s total sales, and ~16% of the company’s overall sales in Q4.
The segment’s backlog also increased by 16% from a year-ago period. Wesco International Inc. (NYSE:WCC) strengthened its position in this market through acquisitions, notably that of Ascent, which provides data center facility management services. This acquisition enhances the company’s ability to offer comprehensive solutions throughout the entire data center lifecycle, from initial construction to ongoing operations and technology upgrades.
Blue Tower Asset Management sees Wesco International Inc. (NYSE:WCC) as an undervalued play on infrastructure growth related to solar, EVs, and AI, despite its higher leverage compared to peers. Here’s what it said regarding the company in its Q3 2024 investor letter:
“In this letter, I will be exploring our holding in WESCO International, Inc. (NYSE:WCC), an electric infrastructure, component, and communication equipment distributor. These distributors are another indirect way to profit from the ongoing boom in solar technology, electric vehicles, and AI technology. Despite the big boost that these technology trends should provide to these distributor businesses, these distributors are not trading at the expensive multiples of AI-related stocks. While most electric component distributors are benefitting from these trends, Wesco is still realizing the integration benefits from a major 2020 merger and is more levered than peers.
Wesco originated in the Westinghouse Electric and Manufacturing Company in 1922, where it was originally the distribution arm of Westinghouse’s electrical and industrial products.
On February 1, 1994, private equity firm Clayton, Dubilier & Rice (CD&R) purchased Wesco from Westinghouse in a $340M leveraged buyout. Wesco was again sold just 4 years later to The Cypress Group which created the holding company Wesco International. In 1999, the company went public. Over the past 20 years, Wesco engaged in over a dozen acquisitions, growing the scale and geographic scope of the company. In 2020, Wesco completed its largest acquisition with the takeover of Anixter International when it used a combination of cash, Wesco shares, and preferred stock to beat out an offer from CD&R…” (Click here to read the full text)
While we acknowledge the growth potential of Wesco International Inc. (NYSE:WCC), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WCC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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