I've not been particularly gentle in my assessments of MSC Industrial (MSM)
management over the years, as I think the company has been slow to
react to the changing realities of the distribution sector, and when it
has reacted, it hasn't done so particularly well (I can't remember which
sales strategy we're on now…). It's even more frustrating to see that
in the context of underperformance relative to Grainger (GWW) and Fastenal (FAST) and the changes/adaptations those companies have been making.
My
chief concern remains the margins, particularly with management
acknowledging that its latest strategy, shifting from a focus on
spot-buy to deeper managed inventory relationships with customers, will
lead to lower gross margins. Less pressing, but still relevant, is
whether the U.S. industrial economy will, in fact, see that second-half
rebound that the Street has been counting on. For now, I see MSC shares
priced to generate a total annualized return in the mid-to-high single
digits, including a roughly 4% yield without the special dividend, and
it's not a particularly compelling name beyond its higher-than-average
dividend.
Read more here:
MSC Industrial Muddling Through A Tough Environment, But Margins Remain A Key Concern
2 comments:
After reading the body of your report I was quite stunned to see that you still own the shares! And this comes after the sentence taht you want mkore than just a dividend story. You are also not convinced that management can adapt to changing circumstances. Very confusing especially with the thousands of stocks to choose from out there.Still, I love your thoughtful analyses.
It's a small position that I'm largely holding for tax reasons.
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