On April 18, 2017, W.W. Grainger (GWW) declined –11% when the company announced earnings that seemed to disappoint analysts.
In addition, many analysts were confident that the effect of Amazon would torpedo GWW even more than what had already been done up until April 2017.
Our take on W.W. Grainger was materially different than some of the big name analysts. However, we weren’t alone in saying the GWW was worth buying.
On April 21, 2017, we said the following of GWW:
“First on our list is W.W. Grainger (GWW), an industrial servicing company. Grainger reported earnings that missed estimates and lowered its outlook that tanked the stock earlier this week. Shares are trading at the yearly low. Based on our dividend model, shares have the potential to reach $260 but we see current price as fair value. Based on the newly revised EPS estimate of $10, one should expect a 30% downside risk. As such, we would advise one to wait for the price to fall another 15% before accumulating shares.”
By August 18, 2017, we said:
“…we specifically advised our readers to wait for a -15% decline before accumulating shares. Sure enough, shares have fallen -17% since and now would be the time for accumulation.”
Since August 18, 2017, GWW has been on a tear. In fact, GWW has managed to exceed the price appreciation of Amazon.com (AMZN) by +25%.
Our advice is that when a stock price gets decimated by the belief that Amazon.com is going to get into a new line of business, it is worth considering whether that company is truly going to get phased out or that you’re being handed a unique buying opportunity.