Wolseley PLC WOS

Wolseley is the world's largest specialty distributor of heating and plumbing products, and a leading supplier of building materials. The company is the market leader in plumbing and heating distribution in North America and the U.K., and holds leading positions in many of its local markets throughout Eastern and Central Europe. We reiterate our narrow economic moat rating for the company, as we still think the firm holds a scale advantage that we think will regenerate economic profits over the long run. Although we characterize Wolseley's industry as having low barriers to entry, we think the firm's scale advantage and large distribution network are difficult to replicate. Additionally, we think recent actions by management provide upside potential for the company. While we are wary of selling businesses near the bottom of a cycle, we think a leaner balance sheet and capital reallocation toward greater return businesses can fare positively for investors. In all, Wolseley seems very well-positioned to grow organically on the heels of a global economic recovery.