According to a recent filing with the Securities and Exchange Commission Alexander Roeper‘s Atlantic Investment Management has trimmed its stake in WESCO International, Inc. (NYSE:WCC) to around 2.13 million shares, representing 4.9% of the outstanding stock, from 2.22 million shares held earlier.
Founded in 1988 Atlantic Investment Management currently has about $2.3 billion regulatory assets under its management, while the value of its equity portfolio stood at $1.33 billion, according to the last 13F filing. Atlantic’s investment strategy involves acquiring large stakes in mid-cap companies, often more than 7% of the outstanding shares, based on their fundamental value.
Follow Alexander Roepers's Atlantic Investment Management
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 123% over the ensuing 35 months, outperforming the S&P 500 ETF (SPY) by nearly 65 percentage points (read more details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
So far this year WESCO International, Inc. (NYSE:WCC)’s stock has fallen by more than 22%. In comparison the Industrial Distribution industry has fallen by about 4.5%. In its financial results for the second quarter, WESCO International, Inc. (NYSE:WCC) missed both the top and bottom line estimates. While revenue of $1.92 billion were $50 million lower than expectations, the EPS of $1.0 came in $0.16 lower than the expected mark. The factors weighing heavily on the company’s performance in the second quarter included weakness in the industrial market, foreign exchange headwinds and slow seasonal start in the non-residential construction markets. The company expects these challenges to continue in the second half of the year, and has thus lowered its financial outlook for the year.
In order to cope with this environment WESCO International, Inc. (NYSE:WCC) laid off some 300 employees during the April – June quarter and also consolidated or closed six branches. More cost cutting measures along the same lines are expected to be introduced during the rest of the year. It is expected that these initiatives combined with the discretionary spending controls will add $0.40 to the fiscal year’s EPS, which is $0.10 more than previous expectations.
