Fiduciary Management Inc. (FMI), an independent money management firm, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, domestic and international equity markets rose. FMI has typically lagged in more speculative-driven bull markets (similar to today’s) and outperformed in more challenging environments driven by valuation framework, focus on business quality, and balance sheet strength. The FMI Large Cap strategy trades at a ~30% and ~50% discount to the 493 stocks in S& P 500 and Magnificent Seven, the FMI Small Cap strategy trades at a ~37% discount to the Russell 2000 and the FMI International strategy continues to trade at a discount to the MSCI EAFE Index. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Fiduciary Management Inc. highlighted stocks like Arrow Electronics, Inc. (NYSE:ARW) in the third quarter 2024 investor letter. Arrow Electronics, Inc. (NYSE:ARW) offers products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The one-month return of Arrow Electronics, Inc. (NYSE:ARW) was 3.65%, and its shares gained 17.33% of their value over the last 52 weeks. On October 14, 2024, Arrow Electronics, Inc. (NYSE:ARW) stock closed at $134.30 per share with a market capitalization of $7.11 billion.
Fiduciary Management Inc. stated the following regarding Arrow Electronics, Inc. (NYSE:ARW) in its Q3 2024 investor letter:
“Arrow Electronics, Inc. (NYSE:ARW) is a distributor of electronic components and enterprise computing solutions. As a distributor, the company benefits from global technology growth without being directly exposed to technology inventor’s risk. Arrow has a diversified set of vendors, customers, and end-markets, as the company serves over 100,000 customers in 85 countries, including thousands of value-added resellers (VARs). No single customer accounts for more than 2% of sales, and their biggest supplier accounts for 10% of sales. The company has performed well over the long-term, growing sales while earning a return on invested capital (ROIC) that exceeds its cost of capital. Today, Arrow trades near its historical P/E multiple, yet earnings are depressed due to lower technology spending. Additionally, the company trades at a little over book value, which is below its historical average. While there is some cyclicality in Arrow’s end markets, we like the counter-cyclical free cash flow profile of the business combined with management’s capital allocation priorities. The company has been advantageously repurchasing its stock, helping earnings per share to increase at attractive rates that are much higher than operating profits. Over the past five years, shares outstanding have decreased significantly, with EPS compounding in the teens. The valuation multiples are attractive given the business quality and growth prospects.”
A close-up view of a technician soldering a circuit board in an electronics manufacturing facility.
Arrow Electronics, Inc. (NYSE:ARW) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held Arrow Electronics, Inc. (NYSE:ARW) at the end of the second quarter which was 34 in the previous quarter. Consolidated sales of Arrow Electronics, Inc. (NYSE:ARW) for the second quarter were $6.9 billion, above the high end of guidance range, but down 19% year-over-year. While we acknowledge the potential of Arrow Electronics, Inc. (NYSE:ARW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Arrow Electronics, Inc. (NYSE:ARW) and shared top stock picks of value investor Oldfield Partners. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.