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weiwentg (98.29)

Fastenal: was worth buying then, is worth buying now

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October 07, 2008 – Comments (3) | RELATED TICKERS: FAST

Fastenal has performed steadily through the last year or so, recently hitting a high of $54. Everything's been selling off in the recent phase of the crisis and the stock price is now $41 and change.

 And yet, Fastenal released data showing their daily September sales are up 14% from this time last year. They have actually been steadily growing sales through the last phase of the crisis.

Fastenal generates an excess of free cash flow, has no long term debt and is able to fund its current expansion plan from cash flow. That's an excellent place to be in right now, given the cost of debt. I recently ended a pick on Cemex; I was uncomfortable with their debt situation, as they had some coming due fairly soon. Although Fastenal's growth will also be slowed by the credit crunch, I think they will come out ahead.

Another short term positive for Fastenal is its recent addition to the S&P 500 index. Obviously, index funds have to buy the stock, which isn't a bad thing. I should note that Fastenal reports their quarterly results on Oct 13 and that one might expect volatility either way. The September data they released, however, contains no surprises (although it's surprising that they released any).

3 Comments – Post Your Own

#1) On October 09, 2008 at 7:55 PM, beegdawg007 (< 20) wrote:

FAST seems very pricey with a forward PE of 18 or so.   It is also dependant on the construction industry.   That is the most interest rates sensitive industry.   Companies like MSFT, IBM, CSCO and HPQ are all sitting on enormous piles of cash and each is trading with a forward PE of less than 10.   I can actually list a half dozen stocks which are now trading with forward PEs of less than 3.   If this market rebounds, FAST will likely also rebound but other stocks will rebound faster and further.   This is a traders market, not an investors market.  The best buy here when the time is right is an ETF like QQQ, KOL, SPY.   I see no need to risk an investment on a single stock at this moment in time since this is definitely NOT a stock pickers market.   Valuations are meaningless now.

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#2) On October 09, 2008 at 10:31 PM, ewpadilla (< 20) wrote:

As an employee of Fastenal, I feel I must at least try to dispell a misconception about us that many people seem to have.  We are not dependent on the construction industry.  Fastenal, while being the largest supplier of fasteners in the US, offers a huge variety of products ranging from fasteners (of course) to power tools, janitorial supplies,winter workwear, and even our own brand of bottled water.  Our customers are not only construction outfits, but also government entities, mining concerns, and even the weekend handyman. 

We are always trying to increase our customer base and are even opening new stores during these troubling economic times.  Our management personnel are very innovative and are  always looking for ways to increase our efficiency in order to better serve our customers.  Through all levels of Fastenal's structure, we strive to succeed and we take failure personally.  These facts are the reason our sales are increasing even now. 

(In case you're wondering, I do not work in sales or marketing.  I am a Fastenal truck driver operating in northern Minnesota.)

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#3) On October 10, 2008 at 12:57 PM, weiwentg (98.29) wrote:

Thanks for that comment! I am aware that Fastenal isn't solely dependent on the construction industry. Although the company is economically sensitive, I think there's a significant secular growth story like with Carmax. I think the forward PE of 18 is justifiable. Remember that PE is a rough guide.

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