Most Apple fans on Wall Street have probably never heard of Fastenal. But its shares have been beating Apple’s big time. Since it went public, Fastenal has gained 13,428.60% compared to 1,365.10% of Apple’s.
Why bother comparing Apple, a technology company, with a wholesale distributor of industrial and construction supplies?
As a lesson for investors who chase after hot stocks and end up missing sleeper stocks.
Fastenal achieved these numbers through multiple advantages that keep competition out of its market and allow it to sustain above industry average rate of profits. Fastenal’s operating margin is twice that of Home Depot, for example.
Last week, the company reported a 43% jump in earnings and a 13% rise in sales for its June quarter.
One of Fastenal’s advantages is scale, the cost savings associated with a larger corporate size. The wholesaler has 2,683 stores in the US and Mexico compared to 2,274 of Home Depot.
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Then there’s scope, the cost savings associated with the offering for sale of different products through the same channels. Fastenal sells hundreds of thousands of MRO, construction and OEM products that extend to 15 product lines.
And there’s customization, the benefits associated with the offering of customer-tailored solutions. Fastenal’s manufacturing facilities tailor its products to different customer segments.
Wait, there’s more. There’s bundling, the package of different product characteristics to produce unique consumer offerings — Fastenal’s extensive store network and highly trained personnel allows the company to bundle products with services.
And there’s aggregation, the benefits associated with pulling a large number of orders together. Fastenal helps its customers cut their transaction costs by offering them a one-stop solution to their hardware needs.
And there’s the integration of its supply chain activities — it creates another “moat” that keep competitors off its market. Fastenal owns manufacturing facilities, a transportation fleet, distribution centers, inventory supply systems, and retailing and sales service facilities.
The bottom line: Don’t overlook sleeper stocks that have multiple sources of sustainable competitive advantage. They can outperform hot stocks over the long-term.
Disclosure: I own shares of FAST