Distribution stocks bounce back
By Staff -- Industrial Distribution, 12/1/1998
Newton, Mass.--Distribution stocks took a particularly nasty hit in late summer and early fall, as trouble with the world economy and the fear of a slowing U.S. economy drove many stocks to new lows.However, investors savvy enough to jump in when things were bad have been richly rewarded over the past two months.
At press time, Fastenal, which bottomed out at $20 in September, vaulted to just over $40, while MSC Industrial and Industrial Distribution Group were also up more than 30 percent since hitting their lows.
"I think we've got several months ahead where we see softer sales growth rates for industrial distributors," says Jeff Germanotta, a first vice president at Robert W. Baird & Co. "But I see factors that leave me encouraged as we move into 1999, like low interest rates, low inflation, and a rebound in equity markets, particularly in Asia."
Those softer sales growth numbers were echoed by IDG chairman Martin Pinson when the firm announced its financial results for the third quarter in November. While sales increased 40 percent, "the slowing of orders we began to see early in the third quarter became more pervasive towards the end of the quarter," said Pinson. "Nonetheless, we were able to maintain continued year to year growth in net sales for our nine founding companies, although at a slower rate of 2.2 percent for the third quarter.'' I
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