By: Jake Levinson
Grainger was a bottom-decile stock performer last year (+2% vs. XLI +22%); this year so far it’s top-decile (+26% vs. XLI +1%). As we often say, mean reversion is a powerful theme in industrials. And distributors in general have seen outsized volatility due to Amazon concerns, offset by cyclical tailwinds, tax tailwinds, and recent execution that has been quite good. GWW has had a couple solid quarters in a row. Certainly some noise in the quarter, but Grainger’s fortunes have quickly turned as industrial markets have recovered and price cuts take effect. And despite a significant level of skepticism amongst investors, it’s becoming harder to argue at this point that GWW’s pricing actions weren’t more of a reset, and not the beginning of a downward spiral. U.S. volumes up 9% on price down 2% speaks to that.
Note: Published April 19th, 2018