Pzena Investment Management, LLC - Focused Value on CDW Corporation
Thesis
Pzena increased its CDW position after near-term margin pressure and a hardware-heavy sales mix weighed on the shares despite solid revenue growth. The broader thesis is that CDW is evolving from a hardware distributor into a full-stack solutions provider with a higher mix of software and services, while its scale supports investments in vertical expertise that smaller competitors cannot match. Pzena expects margins to stabilize and positive operating leverage to re-emerge as the solutions-and-services transition matures, with AI potentially increasing the complexity of customer IT environments and therefore the value of CDW's services.
“We increased our position in IT solutions distributor CDW, which sold off sharply due to near-term margin pressure from a mix shift toward hardware despite solid revenue growth.”
Key risks
- Near-term margin pressure from a mix shift toward hardware