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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Kathleen capps who wrote (4668)	8/16/1998 6:08:00 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78640

Kathleen, >What did you see regarding unclear growth in FAST? >The only mention I've seen in >the press has been fear of being hurt by the GM strike. I had in mind long-term growth. I started discussing FAST at Buffetology thread, so I look at it as a Buffett stock. What is a major risk for any Buffett stock? The possibility that the history does not repeat itself anymore. I.e. the stock had great growth, great ROE for 10 years, but the party is over. Look at ELY and NKE as examples that can have this future. Look at RBD as a busted Buffett stock. Now, I look at FAST and I am trying to figure out whether the future will be as good as the past. I don't know much about the business, but I notice that they have 644 shops in 48 states. They plan to add 200 more in 1998. IMHO, geographical expansion is limited. I notice that they released mail-order catalog last year, so this growth venue is covered. Are they going to sell their products over Internet? Even so, I am not sure where the growth is going to come from for next 10 years. Fastenal also added 4 new product lines in 1996 and 2 lines in 1997. This is additional growth, but some of it may mean diworsefication and lower margins. Buffett owns some retailers. But most of them are no-growth cash cows. This is fine within Berkshire, but in the real world management usually goes different way. They usually diworsify. Nobody likes to say: "We can't grow anymore without loss of margins, so let's stop expansion plans and give all the FCF to shareholders". Both inventories and accounts receivable increased in 1997. This may correspond with the site expansion. Finally, FAST had negative free cash flows for the last three years. This may be fine for fast growing company, but I wonder what is going to happen in the future. In summary, I am not very comfortable with business because I don't know it well. The future growth therefore is unclear and the return to shareholders uncertain. I would invest in FAST if I got satisfactory answers to my questions, or if it fell to "value stock" level. But that's still far with PE 30 and PSR 3. Good luck Jurgis