There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

October 3, 2011 - Fastenal Company (FAST-NASDAQ), incorporated in 1968, sells industrial and construction supplies, wholesale and retail. As of December 31, 2010, the Company had 2,490 store locations located in the United States, Puerto Rico, Canada, Mexico, Singapore, China, The Netherlands, United Kingdom, Hungary and Malaysia. During the year ended December 31, 2010, the Company operated 14 distribution centers in North America. Stores are operated under the name Fastenal. The Company's product line includes fasteners, tools, hydraulics and pneumatics, janitorial supplies, welding supplies and metals.

While there are several things Conservative investors will like about FAST, one outstanding attribute that they'll focus on is this: there is no debt on the books. Not one borrowing. They do have rental agreements on their stores that mean annual payments of $97.3 million, but there is no debt that requires interest payments.

There are no screws loose at Fastenal. The company started small and stayed there, with products that is. There's nothing small about profits or sales. In the last 5 years, revenues grew by 12.5% a year, on average, while earnings increased by 14.5% annually, on average. For the next 5 years, analysts see growth in earnings averaging 16% a year. In the current quarter, they expect an increase of 27% in earnings, then another 27% in the fourth quarter.

Twelve analysts have a consensus opinion of $1.21 for this year's results, up from 90 cents last year. Next year, they see $1.45. Quarterly results for the third period are due out on October 13. They should be 33 cents compared to 26 cents last year in the third. For the final quarter, look for 28 cents vs 22 cents in last year's fourth.

In the first half of this year, earnings were 56 cents, well ahead of the 42 cents of last year's first half. More sales, more volume and strong cost control contributed to the positive results. They should all be evident in the second half as well.

Reaching new markets and developing established ones are part of the growth plan at FAST. Management sees between 150 and 200 new stores opening during 2011. If it reaches the midpoint of those estimates (175), it would represent a 7% increase in new store growth compared to 2010.

The founder and current Chairman of the Board, Robert Kierlin, was named the cheapest CEO in the country in 1997 by Inc. magazine. With a multi-billion dollar company, most CEO's have commensurately high salaries, certainly in the millions. He has never taken home more than $120,000 a year. That's still true today, only now he makes $55,500 as Chairman of the Board of directors. Frugality rules in Mr. Kierlin's life, and it's part of the culture at FAST. Of course, since he owns over 14 million shares of stock, he isn't worried about his mortgage (if he has one). His belief since founding the company is that he would only be successful if all shareholders were. He took most of his compensation in stock, ensuring that his wealth came when all stockholders gained.

Essential numbers:
- Trailing P/E: 31
- Forward P/E: 23
- Price to sales ratio: 3.9
- Price to book: 7.25
- Operating margin: 20.10%
- Profit margin: 12.45%
- Return on equity: 24.02%
- Return on assets: 20.93%
- Revenues (last 12 months): $2.52 billion
- Total cash: $115.65 million
- Total cash per share: 39 cents
- Total Debt: 0
- Current rato: 5.73
- Book value per share: $4.59
- Change in stock in the last 52 weeks: +24.69%
- Shares Outstanding: 295.12 million
- Float: 267.78 million
- Insiders own: 9.26%
- Institutions have: 88.9%
- Annual dividend: 52 cents
- Yield: 1.6%
- Financial Strength: A+

FAST has always traded at a high multiple to earnings. The lowest P/E ratio in the last 15 years was 23 with some years showing 48 and 43. Investors have always loved this stock. With good reason: In the last 15 years, it has only seen earnings fall twice. Every other year has shown advances. With the Forward P/E at 23, it may be a good time to look more deeply into FAST. It's high return on equity, absence of debt, and solid management make it an ideal candidate for most conservative investors.

- Company Web site: www.fastenal.com

  Ted Allrich