Fastenal's 214,000% Surge: A Contrarian's Dream or a Billionaire's Mistake?

In the annals of investing, few stories rival the staggering ascent of Fastenal (FAST), a company whose stock has soared over 214,000% since its 1987 IPO, including dividends. Yet, this industrial powerhouse is now under scrutiny as prominent money managers like Cliff Asness and Israel Englander reduce their stakes. For contrarian investors, this presents a compelling question: Are these billionaires missing the forest for the trees, or is Fastenal's rally finally overcooked? Let's dissect the data, the splits, and the psychology to find out.

The Story of Fastenal's Growth: Splits as a Barometer of Success

Since its IPO in August 1987, Fastenal has executed nine stock splits, most recently a 2-for-1 split in May 2025. These splits aren't arbitrary—they reflect sustained growth and accessibility to retail investors. A company that splits its stock repeatedly is signaling confidence in its ability to compound value.

The stock's performance isn't luck. Fastenal dominates the $100 billion industrial supplies market, selling fasteners, tools, and safety gear to manufacturers, construction firms, and energy companies. Its managed inventory solutions, including IoT-enabled FASTVend vending machines, allow clients to access critical parts on-site, reducing downtime. This deep integration into supply chains has turned Fastenal into a “moat-protected” asset, with over 153,000 SKUs and a hub-and-spoke distribution network spanning 1,400+ locations.

Why Billionaires Are Selling: Profit-Taking vs. Valuation Anxiety

The recent sales by Asness (AQR Capital) and Englander (Millennium Management) are rooted in two rationales:

1. Profit-Taking on Historic Gains: With a 214,000% return since 1987, it's logical to lock in gains. Asness reduced his stake by one-third, while Englander offloaded 75% of his holdings. These moves reflect a quantitative, rules-based strategy focused on rebalancing portfolios.

2. Valuation Concerns: Fastenal's forward P/E of 35 is 16% above its five-year average, raising questions about whether the stock is pricing in perfection. Critics argue that even high-quality companies can overheat, and the current multiple leaves little room for error.

The Contrarian Case: Compounding and Cycles Favor the Long-Term Holder

Here's why these sales may prove shortsighted:

1. Economic Cycles Are Fastenal's Fuel

Fastenal's sales are 75% tied to manufacturing, an industry that thrives during economic expansions. Since World War II, expansions have averaged five years, while recessions have averaged just 10 months. Fastenal's model is built to weather downturns—its recession-era profit margins are half those of expansions, but the company has never posted a loss in 37 years as a public firm.

2. Valuation Isn't the Whole Story

While the P/E is elevated, Fastenal's dividend yield of 0.8% and 5% average annual earnings growth are modest. However, compounding over decades changes everything. At 5% annual growth, an investor who bought $1,000 of Fastenal at IPO would have $2.1 million today—proof that time, not timing, is the key.

3. The Split History Speaks Volumes

Nine splits since 1987 mean that investors who held through the decades avoided the “all or nothing” risk of a single high-priced stock. For example, a shareholder who reinvested splits would have seen their shares multiply exponentially, smoothing out volatility.

Risks and Considerations

• Near-Term Volatility: A potential recession or a prolonged slowdown in manufacturing could pressure the stock.
• Competition: Rivals like MSC Industrial might nibble at margins, though Fastenal's scale and tech edge (e.g., FASTVend data analytics) are hard to replicate.

Investment Advice: Play the Long Game, but Stay Vigilant

For contrarians, Fastenal's fundamentals argue for a buy-and-hold strategy, despite the frothy valuation. Here's how to approach it:

1. Dollar-Cost Average: Use dips (e.g., post-split volatility or market corrections) to build a position gradually.
2. Focus on Dividends: While the yield is low, the payout has grown steadily for decades—a sign of management's discipline.
3. Monitor Valuation Cycles: If the P/E contracts to its historical average, consider trimming gains.

Conclusion: A Stock Built for Decades, Not Days

Fastenal's 214,000% surge is a testament to compounding and the power of riding secular trends. While billionaire managers may see it as a high-flying stock due for a fall, the reality is far more nuanced. This is a company that owns its supply chain, thrives in growth periods, and weathers recessions—a rarity in today's volatile markets.

The contrarian play? Hold fast. The stock's splits, resilience, and moat suggest this isn't a bubble but a generational opportunity. Asness and Englander may be right in the short term, but history favors those who trust in the long arc of compounding.

Invest wisely, and let time do the work.