CDW (CDW, Financial) logged steady, double-digit revenue and operating earnings growth during the quarter as its “Omni-Office” strategy of outfitting small and medium businesses with software, hardware and services – wherever workers decide or need to work – continues to resonate. CDW organizes itself across several end-markets, with each of these end markets at different stages of building out its omni-office presences. As IT hardware has become increasingly scarce due to vendor shortages and strong demand, CDW has flexed its balance sheet in the short-term in order to ensure inventory availability for long-term customers to continue this omni-office buildout. We expect this pressure on inventory turns will eventually return to normal and help sustain historically high returns on capital. The market continues to be infatuated with software services and has overlooked the fact that software providers rely on CDW for distribution in the small- and medium-sized business segment. CDW’s consistent returns, cheap multiple, and mission-critical functions that it offers to vendors and customers continues to be an attractive risk-reward for portfolios.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners first-quarter 2022 letter.
