Recently, Sequoia’s fund manager David Poppe and Bob Goldfarb won the honor of Fund Manager for the Year 2010. Goldfarb explains why they fell in love with the stock:
Except to transcript per Morningstar.com:
Breen: You guys share a lot with Buffet and Munger in that you like firms with moats and defensible businesses and sustainable competitive advantages, but you also put a pretty big emphasis on management.
So you have a firm, Fastenal, that we've talked about before, which you've owned for a very long time, and it's not your typical growth stock; it's actually an industrial fastener company. Maybe you can just talk about the attraction there. That’s not something we see a typical value manager own, but you've done very well in it, and it continues to be solid company.
Goldfarb: It's just a magnificent company, and it’s a real tribute to Bob Kierlin who is the founder. They just build a better way of distributing industrial products, beginning with fasteners. I think their model is superior to their competitors'. It's branch-based, whereas most of their competitors--none of their competitors have the number of branches that Fastenal has. They add to that, they sell out of the branches. So, unlike Grainger, where my understanding is that, I think, Grainger has experimented with a few larger stores, seeing how successful Fastenal has been and in fact, has increased its line of fasteners.
But Fastenal, they are out hustling from branches, they have a big salesforce that’s out making calls and stocking bins etc. Industrial distribution is a huge industry. They have maybe a 2% share, so they've got a long way to go, and Will Oberton, who is Bob Kierlin's choice to succeed him as CEO--Will is just wonderful, and you couldn’t ask for a more stockholder-friendly company.
Read the full Morningstar interview transcript here.
Here are GuruFocus’s data illustrating Squoia kept the stock more than 10 years ago, beyond the maximum scale of our chart. As Goldfarb discussed in the interview, the sale of the stock has been to keep the weighting of the stock in the portfolio within reasonable limit:
About the author:
My name is Ben C. and I am 2nd year MBA candidate at the Anderson School of Business at the University of California- Los Angeles. I have a BS in Economics from the Wharton School of Business at the University of Pennsylvania. Before coming to Anderson I worked as a generalist equity research analyst for Right Wall Capital, a long-short equity hedge fund located in New York City. Prior to working at Right Wall I worked as an analyst at Blue Ram Capital, another long-short equity hedge fund located in Rye Brook, NY. This past summer, I worked for West Coast Asset Management as a research analyst. West Coast, which was co-founded by Kinko’s founder Paul Orfalea, is run by well-known value investors Lance Helfert and Atticus Lowe.