FPA Queens Road Small Cap Value Fund on TD SYNNEX Corporation
Thesis
TD SYNNEX is the world's largest IT distributor and has expanded beyond traditional hardware into software, security, cloud licenses and services. The fund values the company's entrepreneurial culture and its long record of finding profitable adjacent growth opportunities. Hyve, its data-center integration business, has grown from a small contributor in 2024 to almost 30% of expected 2026 operating income as AI infrastructure demand accelerates. Although the stock has risen sharply and the fund has trimmed, it still views the valuation at roughly 13 times forward earnings as reasonable. TD SYNNEX remains a top-five holding.
“We think that TD Synnex is exceptionally well run, has scale and scope advantages versus smaller competitors and that profits will continue to grow with IT spending at a GDP+ rate.”
Key risks
- AI infrastructure demand could normalize from unusually strong levels
- Corporate IT spending is cyclical
- Distribution is a relatively low-margin business and execution remains important