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Last night, I made Wesco International (WCC) my #11 Pick for my Special Report: 12 Bargain Stock Picks NOW on my subscription site.

Today I’m adding Wesco International to my Jubak Picks Portfolio.

As the market continues to climb to new records, it’s getting harder and harder to find bargain stocks. But they’re out there. Morningstar calculates that Wesco International is 50% undervalued for a fair value price of $112. I get a slightly lower target price of $95 but that would still represent a 70% gain or so, if the stock achieved that level.

Some answers to some minor questions about Wesco International.

Like what is it that this company does?

Like many companies that play key roles in the supply chain, it’s not easy to pin down exactly what Wesco does.

Wesco is a distributor to companies in the industrial, construction, utility, commercial, institutional, and government market enabling its 70,000 customers to order from an inventory from 30,000 suppliers. As a distributor it provides a one-stop global source–itself an advantage given Wesco’s scale–but it also offers value-added services such as vendor inventory management, efficiency assessments, product repairs, and training. The proposition is that you can get it–whatever it is–from Wesco, save money (because of Wesco’s efficiencies of scale), streamline your procurement process, and get delivery (plus whatever added services you need) anywhere in the world.

Wesco’s roots go back to 1994 when Westinghouse Electrical sold its electrical distribution business to a private equity firm that took Wesco public in 1999. On January 13 2020 Wesco finalized its merger deal with Anixter, a competitor in the distribution business, to create a company with pro forma revenue of about $17 billion. (The merger is expected to close in the second or third quarter of 2020.) Which would make Wesco the biggest company by revenue in the distribution sector. (Former No. 1 W.W. Grainger has $11.5 billion in revenue.) The merger will initially require $140 million in one-time spending to unlock annual synergies of $200 million. Morningstar estimates that the combined company will have pro forma earnings that could exceed $9 a share excluding one-time costs. At $112 a share the stock would trade at 12 times pro forma earnings per share. My target price of $95 a share allows for some slippage in both spending to integrate the two companies and in eventual synergies.

Wesco has more than just the merger with Anixter going for it. The trend in supply management is to consolidate orders with fewer and fewer distributors who can deliver on a global scale and provide the value-added technical services necessary to wring efficiencies out of a customer’s supply chain. And that can use efficiencies of scale to deliver lower prices to customers.

In other words, the big–like Wesco–are on trend to get bigger.