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4-Star Industrial Distributors That Look Interesting

Anixter International, WESCO International, and HD Supply all trade below our fair value estimates.

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Brian Bernard: Industrial distributors play an important role as key middlemen connecting a network of millions of customers and suppliers. Three of the distributors we cover--Anixter International, WESCO International, and HD Supply--currently have a 4-star rating and look interesting to us.

Narrow-moat Anixter and WESCO both specialize in electrical distribution and look cheap based on free cash flow yield. We do prefer Anixter because it utilizes a more shareholder-friendly capital allocation strategy. In our view, Anixter is least exposed to the Amazon Business threat, and we think the company's recent acquisitions have been integrated nicely and should start driving better growth. Also, Anixter's balance sheet is about back to normal, so we should see the company resume returning cash to shareholders.

Brian Bernard does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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