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Top 20 Stories of 2016: #8 Investment Firm Buys 15 Percent of WESCO International

 

Every weekday in December, tED magazine is counting down the Top 20 Stories of 2016. Below, the #8 most-viewed story of the year, originally published on January 15, 2016.


 

A Securities and Exchange report filed on January 11, 2016 shows EdgePoint Investment Group, Inc. now owns approximately one-sixth of WESCO International, Inc.

The SEC website shows EdgePoint owns 6,602,222 shares of WESCO stock, which translates to 15.7% of the company, valued at the time at $259,071,191. Based in Toronto, EdgePoint describes itself as “not a mutual fund company, investment firm and wealth manager… We look at it like this: Our job is to take your hard-earned money and use our expertise to invest it in a collection of businesses that we think will succeed over a reasonable amount of time.”EdgePoint also says “We focus on companies with strong competitive positions, defendable barriers to entry and long-term growth prospects that are run by competent management teams…. We buy good, undervalued businesses and hold them until the market fully recognizes their potential.”

As of Thursday afternoon, WESCO stock was selling at $38.90 a share after selling for more than $73 last June. In its third quarter earnings report last October, WESCO announced a 7.4% drop in sales compared to the same period in 2014. It also reported operating profit was down $26 million compared to the third quarter of 2014.

At the time, WESCO’s Chairman and CEO John Engel said, “Our third quarter sales declined 7% reflecting continued foreign exchange headwinds and weakness in the industrial market and certain non-residential construction sectors. Organic sales momentum decelerated during the quarter in the U.S. and in Canada, down 4% and 10% year over year, respectively. While the top line remains pressured overall, our data communications and utility sales continued to grow. The benefits of ongoing cost reduction actions partially mitigated the impact of business mix and lower sales on earnings per share, which were lower than prior year. Free cash flow remains solid at 100% of net income on a year-to-date basis. We repurchased approximately 1.4 million shares in the third quarter bringing year-to-date repurchases to approximately 2.5 million shares, utilizing half of the $300 million share repurchase authorization, while maintaining our leverage ratio within our target range of 2.0 to 3.5 times EBITDA. Based on our third quarter results and a challenging market outlook, we now estimate full year earnings per diluted share of $4.15 to $4.30 on sales down 4% to 5% from the prior year, compared to our previous estimate of earnings per diluted share of $4.50 to $4.90 on sales flat to down 3%. In addition, based upon the strength of our year-to-date free cash flow, we are increasing our estimate of full year free cash flow to approximately equal to net income, above our previous estimate of greater than 80% of net income.”

WESCO will announce its overall 2015 earnings report on January 28.

 

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