FPA Queens Road Small Cap Value Fund on Arrow Electronics, Inc.
Thesis
Arrow distributes a broad selection of semiconductors, generates substantial cash flow and has stronger financials than its closest competitor. After suffering from the cycle and tariffs, the business reported strong year-over-year earnings recovery. Even after reductions, the fund holds a substantial stake at an estimated eleven times current-year earnings.
“the stock trades at ~11x this year’s earnings and we still hold a substantial position.”
Key risks
- Cyclicality in semiconductor distribution
- Tariff exposure
- The recovery from the cyclical trough might weaken