John Rogers Comments on Anixter Intl
- By Holly LaFon
Alternatively, our limited exposure within the technology and energy sectors was a headwind. Within technology, weakness at distributor of enterprise electrical products, Anixter Intl, Inc. ( NYSE:AXE ) impacted performance. Shares fell -10.59% due to concerns regarding the expanding industrial distribution offerings at Amazon.com, Inc. ( NASDAQ:AMZN ). Despite the market's recent focus, Amazon Business has been growing steadily since 2012. Most of the revenues for Anixter originate from projects. While price competition shrinks margins, the services performed are far from expendable, creating a layer of costs and expertise that Amazon would find difficult to replicate or improve upon. The projects themselves reach the distributors through powerful independent representatives, which creates more barriers to entry. In sum, we believe the Amazon announcement does not represent a substantive change in its narrative or Anixter's business, but rather an increase in market attention given to these topics. We also think Anixter is poised to deliver strong earnings in 2018, as the company is likely to be a prime beneficiary of structural tax reform.
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The intrinsic value of AXE
From John Rogers (Trades, Portfolio)' Ariel Funds 2017 shareholder letter.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 4 Warning Signs with AXE. Click here to check it out.
The intrinsic value of AXE
