Seth Klarman's Baupost Group reduced its position in Wesco International by 54% during the second quarter of 2026, dropping from roughly 2.1 million shares to under 1 million, according to the firm's 13F filing. The sale came while Wesco traded near $210 per share and the stock carried top-decile scores on both growth and momentum screens—the kind of technical strength that typically draws continuation money.
Wesco International, a $10.8 billion distributor of electrical and communications infrastructure products, reported 17% year-over-year revenue growth in Q1 2026 and guided for accelerating margins through the back half of the year. The company services utility build-outs, data center expansions, and onshoring-driven electrical demand. Momentum indicators flagged the stock as overbought in late May, with relative strength hitting 82 on a scale where anything above 70 typically signals extended positioning. Baupost began trimming the stake in April, before the June technical rollover that never materialized.
The decision reflects Klarman's discipline around valuation reversion rather than disagreement with Wesco's fundamentals. Baupost entered the position in Q3 2024 when the stock traded at 11x forward earnings and the distribution sector faced inventory destocking fears. By Q2 2026, Wesco's multiple had expanded to 19x forward earnings, pricing in three years of end-market growth that depends on sustained infrastructure spending and no permitting slowdown. The firm booked a 78% gain on the trimmed shares, consistent with Baupost's historical exits at 16-22x multiples regardless of momentum.
Allocators should note that Baupost's remaining ~950,000 shares still represent a $200 million position—large enough to suggest conviction in the long-term thesis but sized for a reset. The firm did not add to other industrial distribution names in the same filing, indicating sector-level caution rather than rotation. Wesco's forward guidance assumes $4.2 billion in U.S. grid modernization spending through 2027, a figure tied to bipartisan infrastructure commitments that have already seen $830 million in delays or rescopes since January 2026. If that capital moves slower than utilities project, Wesco's margin expansion stalls and the 19x multiple compresses toward 14x, putting the stock at $155. Klarman's exit protects against that scenario without forfeiting all exposure if execution continues.
The next decision point arrives in November 2026, when Wesco reports Q3 results and updates its data center backlog figure, currently $1.1 billion. Peers Anixter and Rexel have already flagged lengthening payment cycles from hyperscale clients, though neither has cut revenue guidance. If Wesco holds its 18.5% EBITDA margin target through year-end, the stock likely holds $200 and Baupost's remaining stake continues to work. If margins compress 150 basis points or more—plausible given copper input costs rising 11% quarter-over-quarter in Q2—the stock reprices toward $170 and Klarman's caution reads as early cycle discipline rather than missed upside.