Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Good Stocks

Arrow Electronics the Value Continues

Arrow Electronics (NYSE: ARW) just keeps getting better and better as a value investment. Revenue at the electronic supplier keeps growing, as its financial numbers improve again.

Arrow’s revenues increased by $230 million during the third quarter of 2016; rising from $23.9 billion in June to $24.13 billion in September, the highest figure ever. Over the year that ended on September 30, Arrow added $1.2 billion in revenues. It reported $22.93 billion in revenues in September 2015 and $24.13 billion in September 2016.

That indicates Arrow’s business is capable of steady long-term revenue growth which makes it a good buy and hold stock for your portfolio. Its’ attractiveness is enhanced by the money that Arrow is making.


Is Arrow Electronics Making Money?

The revenue is not the only thing that is growing at Arrow, the net income increased from $508.24 million in June to $516.72 million in September. Over the past year, the net income increased by $61.31 million, rising from $455.41 million in September 2015, to $516.72 million in September 2016.

Not all the cash figures at Arrow were good; it reported a negative free cash flow of -$13.58 million at the end of third quarter 2016. That was a sharp contrast from the free cash flow of $108.84 million Arrow recorded in June.


Some of the other numbers at Arrow were pretty good it reported making $679.89 million in cash from operations. There was also $384.42 million in cash from operations and $13.14 billion in assets for third quarter.

So Arrow is making money despite its rather low profit margin of 1.98%. That makes it a value investment, because the company keeps chugging along making money, but nobody pays attention to it.

Arrow’s Business Explained

Arrow Electronics is a somewhat misunderstood company, because it is an electronics distributor. That means it supplies parts to companies that manufacturer other items.

The business is growing because Arrow supplies the components that technological infrastructure is made from. If Alphabet (NASDAQ: GOOG) builds a new data center Arrow might supply parts for the servers and processors. If Tesla (NASDAQ: TSLA) builds a self-driving car, Arrow will supply the electronic system that controls it.


This makes Arrow, a classic Buffett type value play because it supplies the infrastructure and material other companies rely on. Nobody sees Arrow in operation even though it has very lucrative business.

That is why a lot of technology investors ignore Arrow, even though it is growing. They pay attention to the flashy headlines about companies like Amazon (NASDAQ: AMZN) while ignoring a company that might be providing a lot of the basic technology the Everything Store needs to stay in business.

Is Arrow Electronics a Good Investment?

Arrow is a pretty good investment because it reported a return on equity of 12.05% on September 30, 2016. That indicates the revenue growth is paying off for investors.

What is not paying off is Arrow’s dividend; the company had no dividend yield because it does not pay a dividend. That makes it a poor choice for those seeking an income investment, even it is a great value stock.

My view is that Arrow is best for persons who want a good stock for long term buy and hold. It would be a poor choice for somebody seeking to add income to his or her portfolio.

Instead Arrow would be best for a person seeking a technology growth stock that is not volatile or flashy. Since it is a distributor Arrow fits that bill because it can profit from technology, without having the attributes of a traditional technology company.

If you are seeking a technology stock that is capable of growth but has limited risk, check out ARW you might be pleasantly surprised at what you find. This company will remain a value investment for a long time to come.