You know how Giverny Capital select their stocks?
I believe that they go on Value Line, and they check the stocks with the highest earnings predictability stocks. And they check stocks with growing cash flows. Checking those elements, you could find many of Giverny stocks like Heico, LKQ, Union Pacific, and many more. In fact, Giverny seems to search for stocks that are predictable and steady. And they don't care if the stock is selling for 20-25 times earnings. In fact, they seem to be more willing to pay 25 times earnings than 15 times earnings.
Screening Value Line with that predictability criteria, I discovered a stock with all these characteristics:
Actual ROE: 31
Average ROE last 5 years: 29
Annual EPS growth last 5 years: 17%
Forward PE: 16
Average PE last 5 years: 29
Debt: Low (less than 3 times earnings)
Buyback/Dilution: 6% buyback over the last 3 years (which is a lot)
Earnings predictability (Value Line): 95% (which is exceptionnal)
Payout ratio: 30%
Everything has been growing over the last 10 years: margins, book value, sales, earnings...
That's a fucking amazing performance. And that's the performance of Tractor Supply (TSCO), a specialty retailer supplying the lifestyle needs of recreational farmers and ranchers, as long as tradesmen and small businesses. The company provides livestock and pet products (46% of 2016 sales), hardware, tools, truck and towing, seasonal products (snow blowers and mowers), gifts and toys, clothing, footwear and other stuff...
There's only two negative points with TSCO: growth has slowed
down and I don't know if that's gonna change. Then, the cash flows of
the business are pretty uneven, year after year.
Is Amazon a threat for Tractor Supply? Probably for some products, but not all. Well, 46% of TSCO sales are pet products and probably that Amazon could be a threat there. For the biggest stuff like truck and towing, probably that Amazon is not that much of a threat for the moment, but who knows... Amazon may very well sell cars and yacht and boeing and cruise ships. That fucking business seems to sell everything and kill every retail store still alive.
So, I don't know if TSCO is still a great buy. But it's been a great stock until pretty recently.