We recently published an article titled Greenhaven Associates: Top 10 Stocks to Invest in. In this article, we are going to take a look at where Arrow Electronics, Inc. (NYSE:ARW) stands against the other stocks.
Edgar “Ed” Wachenheim III is the founder, CEO, and chairman of Greenhaven Associates, a hedge fund management company that manages over $7 billion in investments. He serves as the vice chairman of the board of Central National-Gottesman, the chairman of WNET’s board, a trustee at the Museum of Modern Art, and a life trustee who previously chaired both the executive and investment committees of the New York Public Library. Additionally, he is a trustee emeritus and former vice chair at Skidmore College, as well as a trustee emeritus and past board president of Rye Country Day School. A notable figure in the investment community, Ed’s most recent, prominent achievement is the publishing of his book “Common Stocks and Common Sense” in 2016.
Wachenheim’s book, published by Wiley in April 2016, details his investment strategies and provides insight into his career as a successful value investor. In “Common Stocks and Common Sense”, he explains his approach to investing in undervalued companies that face a low probability of permanent loss, with a goal of achieving an annual return between 15% and 20%. He typically holds stocks for multiple years until they appreciate as expected and makes very few changes to his holdings in the shorter term. Even when his investment thesis proves incorrect, Wachenheim argues that his investments still tend to generate positive returns, given that the stock market has historically returned an average of 9% to 10% annually. His strong emphasis on downside risk and capital preservation is a hallmark of his investment philosophy. He also contributed a chapter to the 2017 book “Harriman’s New Book of Investing Rules”, and a second edition of his own book was released in 2022.
Greenhaven Associates was founded in 1987 as a branch of Central National-Gottesman, one of the largest global marketers and distributors of paper, packaging, wood, and metals. Wachenheim invests with a long-term time horizon of three to four years, disregarding short-term performance, analyst predictions, and hedge fund sentiment. This disciplined approach seems to work in Greenhaven Associates’ favor, as the hedge fund has achieved an impressive average annual return of approximately 19% between 1988 and 2017.
Beyond his career in finance, Wachenheim has been deeply involved in philanthropy and nonprofit leadership. He served on the Skidmore College board from 1993 to 2001, where three of his children studied, and later became vice chair and chair of the investment committee until 2003. He has also been a long-time supporter of Williams College, his own alma mater, where a new science center is named after him. Additionally, he is a life trustee of the New York Public Library, where the Trustees Room has been named in his honor. Wachenheim chaired the board of WNET, the PBS affiliate, from 2017 to 2022, having joined the board a year earlier.
His extensive philanthropic work includes serving on the boards of UJA-Federation of New York, the New York Foundation (1990–1999), and the Arthur Ross Foundation. He and his wife oversee the Sue & Edgar Wachenheim Foundation, a charitable organization with reported assets of $438 million in 2022. The foundation has directed significant contributions to cultural and educational institutions, including Williams College, Skidmore College, the Museum of Modern Art, WNET, and the New York Public Library.
According to its 13F filing for Q4 2024, Greenhaven Associates held stocks worth a total value of over $6.7 billion with stakes in 22 companies. Notably, the hedge fund’s recent portfolio modification has revealed that over 65% of its hedge fund is invested in just four stocks.
Our Methodology
The stocks discussed below were picked from Greenhaven Associates’ 13F filings for the fourth quarter of 2024. They have been compiled in the ascending order of Greenhaven Associates’ stake in them as of December 31, 2024. To provide readers with a more holistic analysis of each stock, we have included the hedge fund sentiment regarding each company using data from over 900 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds show interest in? The reason is simple: our research has shown that we can outperform the market by imitating the latest 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)
Number of Hedge Fund Holders as of Q3: 28
Greenhaven Associates’ Equity Stake: $215.48 Million
Arrow Electronics, Inc. (NYSE:ARW) originated in 1935 as Arrow Radio, a Manhattan-based retail store founded by Maurice Goldberg that sold used radios and components. By the 1940s, the business expanded into brand-new radio and home entertainment products, establishing franchises with RCA and Cornell Dubilier. Eventually, it was formally incorporated as Arrow Electronics, Inc. in 1946.
Presently a Fortune 500 company based in Centennial, Colorado, Arrow Electronics, Inc. (NYSE:ARW) is a leading distributor of electronic components and enterprise computing solutions. The company provides supply chain and value-added services to original equipment manufacturers, contract manufacturers, value-added resellers, and managed service providers. On the 2024 Fortune 500 list, Arrow Electronics was ranked 133rd based on total revenue. Moreover, Arrow Electronics has consistently maintained a strong industry position and is famous for being on Fortune’s “World’s Most Admired Companies” list for 12 consecutive years.
Arrow Electronics, Inc. (NYSE:ARW) announced its Q4 revenue of $7.28 billion which, although lower than the $7.85 billion revenue for the same quarter in 2023, surpassed estimates of $7.06 billion by 3.17%. The company’s non-GAAP EPS was announced as $2.94, surpassing estimates of $2.68 by almost 11%. In the Q4 2024 earnings call, CEO Sean Kerins emphasized that, through the semiconductor industry correction and a shifting market landscape, Arrow Electronics has managed to expand its product offerings, customer base, and ECS strategy, focusing on hybrid cloud and AI solutions to drive growth in 2025. Its strong performance and financial resilience despite industry challenges have reinforced its well-deserved position as a top stock in Greenhaven Associates’ portfolio.
Greenhaven Associates owned over 1.9 million shares of the company as of Q4 2024, with a total value of $215.48 million, representing 3.18% of Wachenheim’s portfolio. Moreover, the fund increased its stake in Arrow Electronics, Inc. (NYSE:ARW) by 2% during the fourth quarter of 2024, which suggests a positive hedge fund sentiment about the stock. Overall, by the end of the third quarter, 28 funds out of the 900 funds tracked by Insider Monkey held stakes in Arrow Electronics worth over $1 billion, down from 33 funds by the end of Q2.
Bonhoeffer Capital Management stated the following regarding Arrow Electronics, Inc. (NYSE:ARW) in its Q3 2024 investor letter:
“In our Q1 2024 letter, our case study was our electronic component distributor, Arrow Electronics, Inc. (NYSE:ARW). Arrow’s model is to modestly grow earnings (5-6% per year) and buyback stock at a rate of about 10%. Below is the updated RoIIC model for Arrow:
Given the cyclicality of Arrow’s earnings, it is better to look at the longer term average RoIICs and averages. In this case, the 5-yr average FCF/Equity is 20% and 4-year RoIIC is 83%. As to forward estimates of growth and earnings below is the current estimated growth to 2029 with declining growth after 2026. This results in a 5-year growth rate of 20% consistent with the past 5-year growth rate and higher than the 10-year growth rate. The rationale for the higher growth rate than the 10-year growth rate is increases in component demand from AI and internet of things. If the past is repeated into the future, the EPS growth rate will be in the low teens. Below is an updated 5-year DCF for Arrow Electronics…” (Click here to read the full text)
Overall ARW ranks 8th on our list of Greenhaven Associates’ top stock picks. While we acknowledge the potential for ARW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.