We recently compiled a list of the 10 Best Stocks to Buy According to Value Investor Oldfield Partners. In this article, we are going to take a look at where Arrow Electronics, Inc. (NYSE:ARW) stands against the other stocks recommended by value investor oilfield partners.
Investors, in general, follow herd mentality, causing share prices to drop too low after bad news and rise too high after good news, a tendency further amplified by momentum investing. However, Oldfield Partners LLP, a boutique, owner-managed fund management firm, believes that price discrepancies generated through hyped up news about a certain theme could easily distract investors from finding potential bargains – lowly valued stocks, trading at a healthy discount to their intrinsic worth.
Oldfield Partners was founded in November 2004 by Richard Oldfield. Richard holds a BA (Hons) in History from Oxford University and authored the investing book Simple but not Easy, published in 2007. He has a distinguished career in investment management and governance with his tenure at Oxford University Investment Committee and Oxford University Endowment Management Ltd as Chairman from 2007 to 2014. He is also a director of Witan Investment Trust plc and a trustee for both the Royal Marsden Cancer Charity and Canterbury Cathedral Trust.
Oldfield Partners serves a global clientele, including endowments, pensions, charities, and family offices. Oldfield Partners employs a value investing strategy with a focused, diversified portfolio, no leverage, and a long-term approach. It employs several distinct strategies: Global Equity, EAFE, Global Equity Income, Global Small cap and Emerging Markets (including EM ex China) through separate accounts or a variety of pooled funds.
An example of Oldfield Partners’ contrarian investment philosophy is that of South Africa where political and economic crises can create opportunities to purchase quality assets at significant discounts. However, the country’s structural issues, driven by poor policymaking, weakened institutions, corruption, and a hostile business environment, make the potential for high returns from low valuations less certain. Over the past decade, South African capital markets have underperformed, with negative total dollar returns compared to the S&P’s annualized return of over 12%. The recent elections in May further disrupted the political status quo, adding to the uncertainty.
Opportunity drives Oldfield Partners’ investment strategy, which is why their Emerging Market Fund includes a single Russian investment—Lukoil, a low-cost oil and gas producer. Before the war, the rationale for investing in the stock was its production of a globally traded, dollar-denominated commodity, making it less susceptible to Russia’s domestic economy. Since the war, however, the stock has impacted the fund’s performance, though it remains one of the better “performers.” Over the past three years, while the MSCI Emerging Markets Index has declined by 17%, the oil and gas producer has risen by 62%. Despite this, sanctions have made it impossible for foreign institutions to trade its shares on the Moscow Exchange, forcing the fund to hold them at a “nil value” (zero). The shares remain in custody with dividends still accruing, and the fund continues to seek a legal exit strategy.
Oldfield Partners currently sees more attractive bottom-up investment opportunities in other emerging markets. Although the emerging markets are still generally improving, they make strong valuation targets. While the firm avoids making short-term predictions, their bottom-up valuation models indicate that the fund’s holdings remain appealing, both in absolute terms and relative to other opportunities.
Our Methodology
Stocks mentioned in this article were picked from the investment portfolio of Hosking Partners at the end of the second quarter of 2024. In order to provide readers with a more comprehensive overview of the companies, the analyst ratings for each firm are mentioned alongside other details. A database of around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2024 was used to quantify the popularity of each stock in the hedge fund universe.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A close-up view of a technician soldering a circuit board in an electronics manufacturing facility.
Arrow Electronics, Inc. (NYSE:ARW)
Oldfield Partners’ Stake Value: $69,183,404
Percentage of Oldfield Partners’ 13F Portfolio: 13.07%
Number of Hedge Fund Holders: 39
Arrow Electronics, Inc. (NYSE:ARW) is the world’s largest authorized electronics components distributor (15% market share including larger shares in key markets) serving both electronics OEM customers and component suppliers.
In the second quarter, Arrow Electronics (NYSE:ARW) performed strongly despite ongoing market fluctuations and an extended inventory correction in the electronics supply chain. The company reported revenues of $6.9 billion and non-GAAP earnings per share of $2.78, both exceeding guidance. The Global Components segment outperformed expectations, and while the broader market remains uneven, there are signs of gradual improvement.
Revenue grew sequentially in Asia, driven by increased sales in semiconductors and IP&E, particularly in China. In the Americas, aerospace and defense sectors remained robust, though overall revenue slightly declined. EMEA experienced continued declines in industrial and transportation markets, with Europe being the last to enter correction phases.
Arrow’s Global ECS business exceeded expectations, benefiting from strong cloud and AI-related demand, despite some softness in data storage. The company’s strategic shift towards multi-year subscriptions and recurring revenue streams is fostering deeper client relationships and increasing backlog.
Overall ARW ranks 2nd on our list of the stocks recommended by value investor oilfield partners. While we acknowledge the potential of ARW as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ARW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
