Steve Gorelik

Wesco is an electrical parts distributor that Steve likes and that has become a data center play. Its sales growth accelerated from roughly 2-3% per year to 8-10% per year and the multiple expanded, illustrating how an industrial distributor can re-rate on data center and utility infrastructure demand.

DNOW is a misunderstood oil and gas distributor whose decade of underperformance reflects a historic oil and gas capex headwind rather than a broken business. US rigs fell from about 1,800 at the spin-off to below 600, and global oil and gas investment is roughly 40% below 2014 in real terms, yet DNOW still grew margins and profitability. The MRC Global merger adds downstream and utility exposure plus about $75 million of synergies; combined 2024 EBITDA was about $325 million, and management soft-targets $350 million of EBITDA for 2027. With low capex, DNOW could generate about $300 million of free cash flow on a roughly $3 billion market cap and $3.5 billion EV, about a 10% free cash flow yield. The market historically paid a 5-6% free cash flow yield, so a re-rating on 2027-2029 numbers could drive the stock to $30-$32 by 2029. Management is conservative, buys back stock opportunistically, has reduced debt, and can still do accretive bolt-ons at 4-5x EBITDA.