Best performing US stock since 1987 crash
2 years ago, i highlighted a CEO who i like due to his unassuming, thrifty and generous manner. 2 years later, i discovered that his company’s stock is the best performing US stock since 1987 crash. The company deals with nuts and bolts, the kind of boring stuff you won’t associate with a multi-bagger stock. It is none other than Fastenal. This is a stock Warren Buffett will definitely buy if the owner wants to sell his business although it is selling at a rather high PE now.
Here is an excerpt of the bloomberg article on its success.
“In the past quarter-century, Fastenal is the biggest gainer among about 400 stocks in the Russell 1000 index that have been trading for at least 25 years, surging 38,565 percent, not including dividends, according to data compiled by Bloomberg. Adjusting for splits, the stock has gone from 13¢ on Oct. 19, 1987, to $50.85. It gained 60 percent over the past year.
There is simply no other distributor that offers so many products in so many locations. The company has 2,600 stores that serve retail and wholesale customers, while its biggest rival, W.W. Grainger (GWW), has 450. Fastenal’s 11,000-plus sales force is technically sophisticated and responsive to customers, Chou says. The company also boasts the kind of scale that allows it to buy hundreds of thousands of items at low cost from suppliers around the globe.
The breadth of offerings is an almost insurmountable barrier to competitors. “It would be very difficult to replicate this type of product assortment,” says Chou. “The economic moat in this business grows as Fastenal grows.”
While Fastenal’s products may be mundane, companies can’t live without them. “What Fastenal stocks and sells is essential,” says Morningstar (MORN) analyst Basili Alukos. “If you don’t have enough or the right kind, your plant will shut down. Factories are willing to pay a huge convenience premium to a single distributor that can make sure their supply is safe.”
Fastenal has less than 3 percent of a $150 billion U.S. market, giving it plenty of room to boost sales. And he’s excited that demand for its vending machines is torrid. Fastenal is growing even faster overseas than it is domestically, he adds, so “the best years are still ahead.”
Entry filed under: Investing.