Thursday, April 4, 2013

WW Grainger (GWW) 2013 Review


W.W. Grainger Inc is the leading provider of maintenance, repair, supplies and service for safety, lab, automotive and industrial products to businesses and institutions to keep their facilities and equipment running.  The company has grown profits and dividends at a 13-14% rate over the past 10 years earning a 12-20% return on equity.  While GWW was impacted by the slowdown in the economy, it made a strong come back in 2010 and should continue to record profit growth for the long term by:

(1) expanded product offerings.  The company added 234,000 since 2006.  It is also rapidly growing its private label products,

(2) rapid penetration of the e-commerce market which is the fastest growing segment of its business,

(3) international expansion,

(4) strong cash flow which sustains a continuing stock buy back program.

 Negatives:

(1) slow global economic growth,

(2) margin problems in Canada.

      GWW is rated A++, has a 15% debt to equity ratio and its stock yields 1.7%.

  Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio       Since 2003

GWW        1.7%            13%              28%             10
Ind Ave      2.0               10                 28                NA

                Debt/                        EPS Down       Net        Value Line
               Equity         ROE      Since 2003      Margin       Rating

GWW       15%           24%           1                   9%           A++
Ind Ave     24              17            NA                 10             NA

   Chart

            Note: GWW stock made great progress off its March 2009 low, quickly surpassing the downtrend off its September 2008 high (red line) and the November 2008 trading high (green line).  Long term, GWW is in an uptrend (straight blue lines).  Intermediate term it is in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The Dividend Growth owns a one half position in GWW, having Sold one half when dictated by our Discipline.  The upper boundary of its Buy Value Range is $81; the lower boundary of its Sell Half Range is $200.





4/13

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