Login | September 23, 2018

Bullish on Tractor Supply Co.



MALCOLM BERKO
Taking Stock

Published: September 13, 2018

Dear Mr. Berko: I bought 100 shares of Tractor Supply Co. in June 2015, paying $95 a share. But it hasn't been there since. I know that the company's revenues and earnings have increased nicely since I bought the stock, but I watched the stock fall to $50 last year, and it's still a long way from $95. My stockbroker wants me to buy another 100 shares and suggested that I write to you for an opinion. He said you told one of his other clients last month that Tractor Supply could be a $130 stock in two years. If so, then I will buy 100 more shares. -- KG, Wilmington, N.C.

Dear KG: In May, I told a reader that Tractor Supply Co. could trade at the $120-$140 level in two years. However, I have no idea whether the writer was your broker's client.

For a city guy like me, it's a hoot to wander those 15,000-to-20,000-square-foot Tractor Supply stores (TSCO-$83). TSCO was founded in 1938 as a mail-order tractor parts business and grew to a successful retail store in charming Minot, North Dakota. TSCO now has 1,840 locations in 49 states. It is the largest retail store chain that caters to the rural lifestyle and needs of recreational farmers and ranchers and plans to open at least 80 stores a year in outlying metropolitan markets and rural communities. TSCO is also a go-to spot for tradesmen and small businesses. The bright, clean and colorful store I visited had the sweet smell of wet hay and the pungent scent of fertilizer, mixed with the sharp smell of new Goodyear tires. And all the staff members were well-dressed, friendly people.

TSCO sells a wide variety of agricultural and livestock supplies, plus a fine selection of tools and workwear. It sells a comprehensive yet localized assortment of items for horses, livestock and small animals, including products for their health, care, growth and containment. TSCO sells all sorts of hardware, truck boxes, tires and towing products and has impressive options for footwear. Seasonal products include heaters, lawn and garden items, snowblowers, trenchers, lawn mowers, and tractors. Gifts and toys round out TSCO's inventory.

And because a growing number of Americans own pets, management in 2005 opened Petsense, a chain of retail supermarkets (about 6,000 square feet) in outlet malls and rural markets across the country. Founded by Jim Dougherty, who also founded PetSmart in 1986, Petsense has 181 stores in 24 states. Petsense promotes a broad selection of competitively priced natural pet foods and supplies. It doesn't sell pets; however, it aggressively promotes animal adoption via local shelters and rescue centers. These bright, clean stores also provide pet grooming services and sell grooming supplies, collars, harnesses and leads, bowls and feeders, and beds and mats, as well as a large variety of natural and gourmet dog and cat foods.

My records only go back to 2000, but since then, TSCO has truly been a remarkable company. Since 2000, TSCO has increased its earnings every year, from 18 cents a share in 2000 to an expected $4.10 per share this year. This little-known large-cap company has also increased its book value every year since then, from $1.02 in 2000 to $11.15 today. And revenues have grown every year this century, from $974 million in 2000 to a projected $7.7 billion this year. Since coming public in 1994 at $20 a share, TSCO has had four 2-for-1 splits -- in August 2002, August 2003, September 2010 and September 2013. According to Historical Stock Price, a $10,000 investment in TSCO in August 2008 would be worth $91,000 today. That ain't chopped liver. Oppenheimer, Ned Davis Research, Thomson Reuters, Wells Fargo, Piper Jaffray and Goldman Sachs are bullish on TSCO and have available research reports on this Brentwood, Tennessee, company.

So, add 100 shares to your position. You'll be glad you did.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.


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