I’m headed back to Florida next week. With all the rain we’re getting in northern Kentucky, the usually humid Sunshine State sounds rather appealing right now.
Check out our H2 hedge fund letters here.
This time, I’m headed to Orlando, so I won’t be near the beach to enjoy another pre-meeting sunrise stroll. But I will be near the “happiest place on earth.” It’s a very tongue-in-cheek phrase around the Hargett house.
Hayden Capital's performance update for the second quarter ended June 30, 2022. Q2 2021 hedge fund letters, conferences and more Dear Partners and Friends, The markets continued to sell-off in the second quarter, especially for internet-based businesses. This year continues to be the toughest stretch for us, since the Hayden’s inception. Inflation concerns and the Read More
In our first visit to Disney World as a family, my wife exclaimed “This is NOT the happiest place on earth!” after a four-hour wait to get pictures with my daughters and Rapunzel.
The slogan got me thinking, however. What would the happiest place for an investment portfolio be? Cheesy segue aside, I believe that place would involve old-school buy and hold. You buy stock in a company you can rely on to return solid gains for years on end and let it ride until you’re ready to cash in.
I’ve been told by many in the investment community that such stocks don’t exist anymore. A quick Google search will turn up numerous articles and books titled: “Buy and Hold Is Dead.”
I would argue that these naysayers just aren’t looking in the right place. And, as I promised last week, today we are going to look at another undervalued investment opportunity that has “buy and hold” written all over it.
IT Will Never Die
Changes aren’t permanent, but change is. I’m paraphrasing Rush lyrics here, but it’s a fair statement on the technology sector as a whole. In the digital age, everything changes.
Information technology (IT) services change, software changes, and hardware goes through drastic revisions and shifts in mere months. It makes investing in technology both exciting and difficult by forcing you to stay connected to the latest shifts and developments in the market.
But what if you could bypass all the speculation on the next big semiconductor chip, graphic processor or software package and still benefit from the IT market’s advance?
You can, and it’s as easy as investing in one company: CDW Corp. (Nasdaq: CDW).
CDW provides diversified IT solutions to business, government, education and health care organizations in the United States, Canada and the United Kingdom. The company delivers everything from basic hardware like desktop PCs to printers, to mobility, security, data center optimization and cloud computing needs.
Essentially, CDW is what IBM used to be back in its heyday … before the blue-chip firm became too bloated and had to reorganize.
On the fundamental side, CDW is a solid revenue machine. During the past five years, the company has averaged annual growth of 18.65%, besting the S&P 500’s average. This year, the company is projected to see revenue growth of about 24%, with next year coming in near 23.3%.
As an added bonus, CDW pays out a quarterly dividend. The current yield is only 1.17%. It’s nowhere near Seagate Technology’s (Nasdaq: STX) 5% yield that we looked at last week, but still respectable. CDW also recently bumped its dividend payout 31% to 21 cents per share. It’s payable on March 12 to shareholders of record as of February 26.
CDW stock’s price action matches its strong fundamentals. Since going public in June 2013, CDW shares are up more than 300%. Last year, the shares were a standout, with a gain of more than 30%, and CDW is up roughly 2.5% so far this year — market correction and all.
In fact, now is an excellent time to add CDW stock to your portfolio. The shares recovered quickly following the recent market correction, and are now poised to break back above its 50-day moving average.
As I’ve noted before, such breakouts are often signals for technical buyers to dive back into a stock. Getting in now should allow you to take advantage of those short-term gains, helping you pad your longer-term returns. I consider CDW a value buy up to $75, with pullbacks presenting opportunities to add to your holdings.
Until next time, good trading!
Assistant Managing Editor, Banyan Hill Publishing
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