As I explained in Part 1, Fastenal is an excellent company economically. How good is the management? I don’t have the opportunity to meet with Fastenal’s executives, so I’ll read between the lines. And I see several positives.
Fastenal’s annual report includes the 10-K form, which Fastenal and other publicly traded companies MUST file with the SEC. The 10-K form must include a description of the company’s risks and additional details that may put the company’s financials in a negative light. Companies are not required to include the 10-K form with the annual report, and most do not. The fact that Fastenal does include the 10-K form indicates that management has nothing to hide. Fastenal also saves money this way, because the 10-K form is printed on cheaper paper. While there are slick color photographs and graphics in the annual report, most of it is occupied by the 10-K form. I believe Fastenal’s management is frugal and isn’t concerned about brown-nosing Wall Street.
Insider ownership also paints a positive picture of Fastenal. CEO William Oberton has 464,880 shares, currently worth over $18 million, and much greater than his salary and even his bonus. He has a lower salary than most of his peers, so he clearly has a large stake in the long-term health of Fastenal. Some of the other insiders at Fastenal own even more stock than Oberton does. For example, Chairman of the Board and former CEO Robert Kierlin owns 13,750,000 shares, worth over half a billion dollars. Clearly, the interests of the people running Fastenal are aligned with those of shareholders.
Thus, reading between the lines shows positive intangibles. Given good economics and good management, Fastenal is clearly worth further investigation.
