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As Buffett has said, “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

I've listened to their conference call and visited their stores (I am a self-confessed tool freak, hotrodder and handyman type). I wish I'd known about FAST stores years ago. They are full of the kind of tools, parts, materials and things guys like me can never find in HD or LOW. Granted, they are low overhead, out-of-the-way places, but once we find them, we never forget. And we're just the amateurs--these people fill a need felt by the automotive, construction and other businesses. I can't imagine they'll reach saturation at 3,500 stores.

But their fortunes are tied somewhat to construction and automotive, which is why their stock price declined last year in my opinion. Still, revenues and earnings remained strong because management remains strong.

Strong management, consistent performance, consistent growth and a wide moat. I doubt anyone could make a legitimate case for funding an attempt to compete with them head-on. Nardelli was headed in that direction at HD--now he's gone and that division is on the block.

I just think a pure DCF approach can fail to take all these factors into proper account.


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