Folks got a whiff of what maintenance and industrial supply specialist Grainger
I've had lukewarm feelings about Grainger for a while now; I own MSC Industrial
Sales were up about 8% this quarter, and operating income once again rose by a double-digit percentage. Unfortunately, the company lowered its sales growth guidance for the balance of the year -- not by a lot, mind you, but still down. When you factor in the fact that people had gotten pretty optimistic about this space in general, Grainger in particular, and are worriedly looking for any hints of economic slowdown, that was all it took to hammer the stock.
It's worth noting that Fastenal also failed to meet its guidance a couple weeks back. Throw in well-known problems with Ford
Personally, I still think this is a more company-specific situation. Fastenal also had a sticky quarter back in January, and Grainger's exposure to residential construction (roughly 10%, depending upon how you view the numbers) makes it perhaps a little less of a tell on the wider manufacturing sector.
Even though I'm not happy with the swoon in the price, I'm hanging on to my MSC Industrial shares, and I'd still consider Applied Industrial or Fastenal at the right price. Of course the economy will slow at some point and that will be bad for both growth and valuation multiples, but I'm not in this game to play a single cycle. I still believe that selecting good companies will pay off down the road -- despite the bumps and bruises along the way.
For more industrial-tinged Foolishness:
Fool contributor Stephen Simpson owns shares of MSC Industrial, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).