Power Up With Wesco

Wesco International (WCC - commentary - Cramer's Take) is lighting up the ticker tape. A year ago, the stock of this electrical-equipment distributor was trading just north of $23; today, it's above $68.

Wesco was formed in 1922 by Westinghouse Electric to sell its products. In 1994, it became an independent company, and it now has 350 full-service branches worldwide. For the year ended Dec. 31, net sales increased 18.2% to $4.4 billion compared with $3.7 billion in 2004. Sales excluding acquisitions increased 15.4%. That's impressive growth for a major player in a mature industry.

In fact, Wesco believes it has plenty of room to grow. By the company's reckoning, the top four electrical distribution companies have only 16% of the $83 billion U.S. industry. It has been growing both organically and through acquisitions. Last year it acquired Carlton-Bates and Fastec Industrial, which had combined revenue of about $350 million.

Financially, the company is also a top performer. Based on two of my guru strategies, I think Wesco will continue to power up.

The O'Shaughnessy Strategy

My strategy, based on the investing style of James P. O'Shaughnessy, looks for companies with market capitalizations of at least $150 million; Wesco's is a robust $3.6 billion.

Wesco's earnings have increased each of the last five years and its price-to-sales ratio for the last 12 months is 0.81, which indicates that it's relatively cheap for a growth stock.

Finally, Wesco's relative strength (the stock's price performance compared with the overall market over the past year) is a strong 94, which puts it among the top 50 of the stocks that passed the previous screens. This suggests we have the chance to buy a growth stock just as the market is embracing it.

The O'Neil Strategy

Wesco logged 118.92% growth in EPS in its last quarter from the same quarter a year ago, way above the minimum of 18% growth that my strategy, based on William O'Neil's approach to investing, screens for. In addition, annual earnings growth for the past five years was 24.59%; the strategy's minimum is 18%.

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At the time of publication, Reese was long Wesco, although holdings can change at any time.

John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of the best selling book, The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.

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