One of the frustrating realities of the market for many investors is that stocks can often move in anticipation of underlying shifts in the fundamentals - the "buy the rumor, sell the news" saying that investors will hear from time to time. In the case of shorter-cycle companies/stocks like MSC Industrial (MSM), industrial end-demand is indeed improving nicely, but the shares have underperformed as the market is starting to look past the short-cycle recovery story.
As I've said in the past, the cycle is going to do what the cycle is going to do, and I believe more of MSC Industrial's performance potential rests on management's ability to execute on new programs meant to increase share, drive sales growth, and improve margins. Given the many and varied disappointments of the past, some skepticism is still in order, though recent results have looked a little better.
I would say that MSC Industrial is still more of a hold today. I don't think the cycle has run its course, and I don't think the shares are overpriced, but I also don't have a lot of confidence in a bull story that rests on management execution given past execution issues. The dividend yield isn't bad, though, so investors looking for income-generating options in the manufacturing sector may find this name a little more attractive.
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Business Is Improving For MSC Industrial, But The Street Isn't So Impressed
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