Tractor Supply More Than Tractors

I am writing this at McDonalds the day after the historic election. Since the rural white working class guys got out to vote without being surveyed by the pollsters I decided to tip my red cap to one of the places many of these do-it-yourself guys hang out.

It is none other than Tractor Supply. The ticker or symbol used to identify it on the Nasdaq Market is TSCO. How do you know it is listed on Nasdaq and not the Dow Jones Market the other trading marked used for stocks? It is the difference in 3 and 4. Nasdaq listed companies have 4 letters in the ticker and Dow companies have 3. That's it.

www.tractorsupply.com


TSCO has 1,575 stores in 49 states. Their mission is to supply the lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses.

It meets all of our Better Investing criteria. Over the past five years:

1. Sales grew by 10.2% ... With 6 Billion with a B in sales it is a large cap company.
2. It leads the industry in pre-tax profit with 9.6% compared to a roughly 6% industry average.
3. It leads the industry in earnings on equity with 27.1% compared to 9%+ for the industry.
4. Earnings grew by 18.7%
5. Its upside downside ratio is 10.1 to 1. Anything over 3-1 is considered a good stat.
6. Its dividend has grown from .22 to .76 in those years. We are more excited about companies that don't pay a dividend so they spend cash on growth. It just increased its dividend to .96.
7. It is currently in the BUY zone at $66.60. The low of the zone is $60 and high $84.20.

Positive factors:

1. Last month it increased its pet supply inventory by purchasing Petsense. Pet food and supplies is a major industry.
2. The oil business will get a boost in a Trump presidency taking away some of the downward pressure on earnings created by energy dominated economies like Oklahoma.
3. It has a healthy 21.5 price to earnings ratio.
4. It just announced a stock buy back that will boost the stock price. A psychological move but usually not good long term.
5. It increased its dividend another move to boost the current price. Short term move. Positive if earnings and sales improve.

Negative factors:

1. It recently reported earnings with a warning that sales will not meet analysts expectations over the near term and cites economies in the south hurt by the downturn in the energy industry.
2. It just announced a stock buy back that will boost the stock price. A psychological move but usually not good long term. This is in both lists. Long term it is negative if earnings and sales don't turn around.
3. It increased its dividend another move to boost the current price. Short term move. A negative if downward trend continues more than two quarters from now.

So for our test portfolio we will put in a buy market order and buy 100 shares at $66.60 or $6,660.00 plus $7 to the brokerage company. Cost basis (our cost at settlement) is $6,667.00. We lose $7. Ha.

We have the following stocks since September 22:

LCI COST US $3,238 it is now worth $2,020 ugh so -$1,212
KMX COST US $5,451 it is now worth $5,046 ugh so -$405
TSCO COST US $6,667 it is now worth $6,689 yea so +$23

Markets as a whole corrected in October in anticipation of the election. LCI was hit by the FDA with a declassification of one of its drugs. That one may need to be sold but it will go in a good direction in a Trump administration. We will see. If LCI reports earnings that follow our criteria we just hold our ground. It not it gets a new home.