American Values Investments manages the American Heroes portfolio, which combines fundamental analysis with its proprietary ranking methodology to select investments. This portfolio’s current top holdings include Hormel Foods (HRL), Cognizant Technology Solutions (CTSH), and NextEra Energy (NEE) (as of end of day 3/16).
On March 9, a new position in WW Grainger Inc (GWW) was added to the portfolio. GWW distributes facilities maintenance products and provides related services throughout the United States, Canada, Japan and Mexico.
On March 11, GWW announced strong sales growth in February:
February Daily Sales by Segment
2011 v. 2010
United States
+8%
Canada
+16% in local currency
+24%
Other Businesses
Includes sales from the acquired business in Colombia
+46%
Investment Underground at Seeking Alpha included GWW in a list of companies that Buffett may buy:
Although Warren Buffett just added to his portfolio with his Lubrizol purchase, he is unlikely to stop there. In addition to the 13 elephants we wrote about last week, here are a few companies that could be his next buy:
…
With a market cap of $9.41B, GWW had EBITDA of $990M in the last year, at an EBITDA margin of 14.06%. Its ROE was 22.86% over that span, and the stock pays out a dividend of 2.16 (1.60%). It has a current ratio of 2.58.
Tom Aspray wrote at Forbes that GWW is also exhibiting bullish technicals:
Since December, GWW has been consolidating from the highs at $140.17 and shows a flag formation on the weekly chart, lines a and b. The insert shows the same formation on the daily chart, which is clearly a continuation pattern. The short-term targets from this formation are in the $148-$150 area. The equality target, using the rally from point 1 to point 2 and measuring up from point 3, is at $153.
How to Profit: The flag formation clearly favors an upside breakout and the only question is how close we are to completing the pattern. I would buy GWW at $132.60-$133.88 with a stop at $127.86 (risk of approx. 4.4%). If we complete the flag formation first by closing above $138.15, then buy at $137.47 or better with a stop at $132.77 (risk of approx. 3.4%).
GWW closed down 0.95% on 3/16, amidst a broad market decline.
Sources:
“Grainger Reports February 2011 Sales Results” W.W. Grainger, 3/9/11. http://invest.grainger.com/phoenix.zhtml?c=76754&p=irol-newsArticle&ID=1538466&highlight=
“After Lubrizol: 10 High Quality Stocks Buffett Could Buy Next” Investment Underground. SeekingAlpha, 3/16/11. https://seekingalpha.com/article/258471-after-lubrizol-10-high-quality-stocks-buffett-could-buy-next
“5 Stocks Buffett Would Love” Tom Aspray. Forbes.com, 3/12/11. http://blogs.forbes.com/tomaspray/2011/03/12/5-stocks-buffett-would-love/
