For various reasons, many value investors shun technology companies. Warren Buffett says he can't understand them. I echo Mr. Buffett's sentiments. My other aversion is that they are too exciting. While I enjoy excitement in other parts of my life, in investing excitement tends to be expensive.
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By exciting, I mean that there is always change in the technology industry. Just look at Google (Nasdaq:GOOG) who many thought would always have a firm grip on internet search. While Google is still dominant, in the technology space, there will always be serious competitive threats.
SEE: Top Stock-Picking Strategies
I Like Nuts And BoltsBoredom is an investor's best friend. Businesses that do boring basic things often find themselves doing very well for very long periods of time often without threat of serious competition.
Look at Fastenal (Nasdaq:FAST), a retailer of bolts, nuts, rivets and other fastener products. You don't find too many folks wanting to sell bolts and nuts these days. But that's great for the folks at Fastenal.
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By exciting, I mean that there is always change in the technology industry. Just look at Google (Nasdaq:GOOG) who many thought would always have a firm grip on internet search. While Google is still dominant, in the technology space, there will always be serious competitive threats.
SEE: Top Stock-Picking Strategies
I Like Nuts And BoltsBoredom is an investor's best friend. Businesses that do boring basic things often find themselves doing very well for very long periods of time often without threat of serious competition.
Look at Fastenal (Nasdaq:FAST), a retailer of bolts, nuts, rivets and other fastener products. You don't find too many folks wanting to sell bolts and nuts these days. But that's great for the folks at Fastenal.
Sales have grown at over 10% per year since 2005 and net income has grown from $166 million to $289 million over the same stretch. As for the stock price: around $8 in 2001 and $36 last year, a decade when the S&P return was only around 10%.
SEE: Introduction To Fundamental Analysis
Growth Stock or Reasonable Growth Company?At a forward P/E of 22.75, it's hard to call the company a bargain, but I doubt the need for screws and bolts is going away anytime soon. It's not hard to understand why: you can't find anything bad about this company. It's debt free, the return on equity is over 25%, and the current ratio is under 6.
Continued growth in profits over the years will increase the intrinsic value, making it a quality business today. Relatively speaking, Fastenal looks to be in a better proposition than fastener and screw-maker Simpson Manufacturing (NYSE:SSD). Simpson currently has a PEG Ratio of 1.54, and a current ROE of 6.5%.
SEE: Ratio Analysis Tutorial
The Bottom LineFishing for investment candidates in boring places will likely turn over some interesting opportunities. People just don't want to talk about a bolt and screw maker at cocktail parties. They want to know when Google will hit $1000 a share. For me, I'm perfectly happy avoiding meaningless conservation and letting the results speak for themselves.
SEE: Introduction To Fundamental Analysis
Growth Stock or Reasonable Growth Company?At a forward P/E of 22.75, it's hard to call the company a bargain, but I doubt the need for screws and bolts is going away anytime soon. It's not hard to understand why: you can't find anything bad about this company. It's debt free, the return on equity is over 25%, and the current ratio is under 6.
Continued growth in profits over the years will increase the intrinsic value, making it a quality business today. Relatively speaking, Fastenal looks to be in a better proposition than fastener and screw-maker Simpson Manufacturing (NYSE:SSD). Simpson currently has a PEG Ratio of 1.54, and a current ROE of 6.5%.
SEE: Ratio Analysis Tutorial
The Bottom LineFishing for investment candidates in boring places will likely turn over some interesting opportunities. People just don't want to talk about a bolt and screw maker at cocktail parties. They want to know when Google will hit $1000 a share. For me, I'm perfectly happy avoiding meaningless conservation and letting the results speak for themselves.
Read more: http://www.investopedia.com/stock-analysis/2012/They-May-Be-Boring-But-Theyre-Steady-Growers-FAST-SSD-GOOG0612.aspx?partner=YahooSA&utm_source=YahooSA&utm_medium=headlinefeed&utm_campaign=Boring+Stocks+Are+Steady+Growers#ixzz1xdpnuluu
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