The nuts and bolts of big returns

Consumers and the business press lavish all sorts of attention to high-tech giants like Apple, Google, Facebook, and other Wall Street darlings. Even their informal moniker “high-tech” exudes a bit of superiority.  Why does everybody pay so much attention? Well, every day, we use our computers, phones, and TVs. They’re part of our daily life.  As I type this on my laptop, Michael Dell’s surname is right there, staring at me throughout my workday. But we also pay attention because of how much money these companies make, right? Apple, Google, and other Silicon Valley behemoths have very happy shareholders.

So what stock has given investors the absolute best returns over the past few decades, since the crash of 1987? Well, it isn’t Apple, which gave investors a 5,542 percent return. It’s not Microsoft either; its investors saw “only” a 9,906 percent return.
It’s a company that supplies, among other industries, the sheet metal fabrication business. It distributes thousands of different nuts and bolts, among a wide variety of other products. It has thousands of storefronts. A small one is in an industrial part just a few miles away from my office. And its stock performance makes returns from the likes of Apple and Microsoft looks like child’s play.

It’s Fastenal. The company’s stock has surged 38,565 percent--from 13 cents in 1987 to $50.85 today, according to Bloomberg. Talk about some happy shareholders, including 72-year-old CEO Bob Kierlin, who founded the company in 1967. Kierlin is so unlike Steve Jobs, Larry Ellison, or other high-profile corporate titans of today.

In fact, he’s a bit more like Warren Buffett (who, by the way, also has a stake in the metal fabrication business; Berkshire Hathaway owns Marmon Group, a holding company that owns several metal fabricators). When a BusinessWeek reporter told Kierlin the news about his company’s eye-popping stock performance, he just said, “Oh, wow. Gee. Well, thanks. That’s great news.”

New York Times columnist Thomas Friedman popularized the phrase “the world is flat,” but Fastenal managers probably don't think that way, at least for their business. Yeah, you can communicate people all over the world with ease, but you can’t make nuts and bolts materialize instantaneously. Physical products still must travel physical distances.

Fastenal is all about getting the right product from point A to B. The company offers vendor managed inventory (VMI) services for various industrial and commercial customers. In fact, on a fundamental level, they act a lot like a metal fabricator, delivering product quickly, when and where needed, and usually to a local customer base. A global company, Fastenal’s business still centers on the local store--more than 2,500 of them. That’s more than Home Depot has.

Supply chains (including Fastenal’s) may be global, but in many important ways, business remains local. It’s about getting the right product to the right place at the right time, often to a nearby customer. That’s a truism worth a 38,565-percent return.