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Quote of the Day

Friday, March 16, 2012

March 16, 2012 -- What's the best performing stock of the last few years? Would you believe it -- it's a leading seller of bolts, screws and nuts. (Their products are known as threaded fasteners in the trade.) The name of the hot company is Fastenal.

 

The stock has been trading for 25 years. The stock has as gone from 13 cents on October 19, 1987 to a recent $50.85. Over the past year Fastenal has gained 60%.

 

The company stocks thousands of varieties of bolts, nuts, screws and cotter pins in 2,600 stores and serves retail and wholesale customers. For many companies, Fastenal's products are absolutely essential. Whole factories can shut down for lack of one of Fastenal's specially threaded bolts. Fastenal has no serious competition. It would be too difficult to compete with Fastenal's thousands of products for spot delivery. In other words, while Fastenal's products are mundane, many companies can't live without them. If maybe five of a certain bolt is needed, price is absolutely no object. The particular bolt may cost a dollar a piece, but if Fastenal can supply the bolt immediately, the price doesn't mean a thing.

 

Fastenal had 45 stores in 1987, which was the year its owner decided to take Fastenal public. The company offered 100,000 of the million shares to its employees. Up to date, the price of Fastenal has risen 38,565% and today the company has a market value of $15 billion. It has stores in all 50 states and has also moved into Mexico, Canada, Asia and Europe.

 

Lesson -- Deal in products that everyone needs. Supply those products in varieties that are beyond the capabilities of any other purveyor. Then offer your products for immediate delivery.

 

TODAY'S MARKET ACTION:

 

My PTI was up 1 at 6398. The moving average at 6356, so my PTI is bullish by 42.

 

The Dow was down 20.14 to 13232.62.

 

Transports were up 1.58 to 5351.32.

 

Utilities were down 1.06 to 453.60.

 

NASDAQ was down 1.11 to 3055.26.

 

S&P 500 was up 1.57 to 14004.17.

 

There were 1388 advances and 1658 declines on the NYSE.

 

There were 118 new highs and 9 new lows.

April light crude was up 1.95 to 107.06.

 

Total Volume on the NYSE and associated exchanges was 4.9 bn.

 

Bonds: Yield on the 10 year T-note was 2.30. Yield on the long T-bond was 3.41. Yield of the 91 day T-bill was 0.086%.

 

Dollar Index was down 0.35 at 79.80. Euro was up 0.77 at 131.79. Yen was up 0.03 at 120.05. Currency Prices as of 1 PM Pacific Time.

April gold was down 3.70 to 1655.80. May silver was down 0.12 to 32.60.

 

My Most Active Stocks Index was up 1 at 323.

 

The Big Money Breadth Index was unchanged at 1048.

 

GDX was down 0.21 at 49.93.

 

HUI was down 2.54 to 476.47.

 

CRB Commodity Index was up 2.03 at 317.93.

 

The VIX down 0.95 to 14.47.

 

Permanent Portfolio Fund (PRPFX) was up 0.31 at 48.72 (previous day closing). YTD Return: 5.71%.

 

Late Notes -- After the recent 217 point surge in the Dow, the so-called follow-up was totally disappointing. I took a limited trading position in the DIAs the day after the surge, but so far, it hasn't been worth it.

 

If the DIAs drop more than 5%, I'm out with a small loss. Remember, in this business it is crucial to avoid the BIG loss. Small trading losses are all part of the game. All of which militates against taking large speculative trading positions. It's one thing being wrong with 300 shares. But it's an entirely different thing being wrong and jumping out with a 5000 share trading position.

 

In trading, if your initial position doubles, you can sell half of your initial position and you're riding the rest for gratis. If you take an initial position and your item breaks out of a recognizable bullish formation, if you want to be a mensch you might double up and then sell out if your item declines below your average cost. Better still, if you don't have trader's nerves, don't trade.

 

Today's Dow disappointing again, down 20 points. Something is eating the Dow. Could it be world deflation in the background? At any rate we saw volume today. Volume surged up to 4.9bn, which makes it a distribution day.

 

Would I buy Apple here? No, there's too much excitement and far too much talk about Apple (new target 900). And the old iPad is good enough for me. While in rehab, someone stole my new iPhone. Luckily, I still had my "old" iPhone, and it's good enough for me. I wasn't wild about the newest iPhone anyway.

 

By the way, I claim that all of today's electronic gadgets are user-unfriendly. Even the directions are unfriendly. Or am I getting too old and cranky?

 

 

CHART BOOKS AND CHART PAGES 2011. Don’t ask me why but in an industry that involves trillions of dollars, nobody else does this. What I’m talking about is chart books of the D-J Averages and another chart book of the all-important breadth index (i.e. advance-decline ratio). I’ve been offering these two chart albums for decades, and I feel they’re invaluable. Actually, I started these albums back in the ’60s because I needed the data myself. The first volume is a complete daily history of the D-J Averages (all three Averages plus bonds and volume) going back to 1885. Important economic and world events are noted on each page. The charts are packed in a big three-ring, hard cover binder, one 12”x17” page for each year.

 

The Dow Jones album is yours for $140; we pay the postage in the States. The second album covers the Dow and the extremely important A-D ratio (daily) going back to 1931. Comments regarding the action are included in many of the pages (one 12”x17” page for each year). The A-D album price is $100, we pay US postage. There’s an extra postage charge of $40 for albums mailed outside the US.

 

For those who own our chart books, the new 2011 pages are almost ready, and the price is $10 for the page of the D-J Averages and $10 for the new A-D ratio page. Please send your money in now; we do not accept credit card orders under $50. Send your checks (drawn on a US bank in US Funds) to Dow Theory Letters, PO Box 1759, La Jolla, CA 92038.