Sell This Tech Stock, Buy Industrial Name

F5 Networks (FFIV) has been a disappointing performer, despite generally reporting better-than-expected earnings ever since my recommendation on Feb. 8.

It has become obvious that the market possesses a lot of skepticism regarding the notion that the company will be able to transition from a hardware- to a software-based company without a disruption in earnings. While the stock is cheap, the things that the market is currently demanding are just too strong for the stock to work in the near-to-intermediate term.

I still like the name, but I feel that we will have a good chance to buy it again at a lower price sometime next year, given the market’s current tendency to over-punish stocks with earnings disappointments. Sell FFIV.

At the same time, I am recommending that you purchase shares of MSC Industrial Direct (MSM), a value-added distributor of metalworking products. MSM has a strong track record of growth and generates a lot of free cash flow that the company then puts to work in its dividends and share buyback programs.

The current industrial slump offers investors to buy shares in this well-run company at less than 15X the projected current fiscal year earnings per share (EPS). MSM has a dividend yield of 4.18%. Buy MSM under $76. My target is $85.

If you are an Inner Circle subscriber following the Model Portfolio, buy a 5% position in MSM for the Value Sector.

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