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(B)(N) TSCO Tractor Supply Company

October 25, 2013

Drama. The Tractor Supply Company is the place to go for all of our chainsaw, outdoor power, heating, horse, hunting and livestock needs, to mention just some of things that we farmers, ranchers, outdoorsmen and weekend warriors need in order to get by. There ought to be one within spitting distance of every town or village with less than 3,000 people and its current 1200 stores just don’t seem to be enough (The Street, October 24, 2013, Jim Cramer: The Keys to This Market).

Tractor Supply Company

Tractor Supply Company
“If they don’t have it, it hasn’t been invented yet.” – The RiskWerk Company

Undoubtedly, this is a great place to work and we’d like to spend our weekend there too, but we can’t let that cloud our objectivity and investment judgement.

As in the case of the Lumber Liquidators, there are several large institutional shareholders with many investments over $250 million and some to over $1 billion in this $9.6 billion company. But the story is much shorter.

The stock price is up over +50% this year and the company will pay a dividend of $145 million to its shareholders for a current yield of 1.5%. The stock price has also been rising steadily since 2010 from $10 and it’s noteworthy that the stock price was about $1 per share for ten years prior to 2003 and then traded in a narrow range between $5 and $15 until 2010 when it was jump-started to the current $70.

However, another aspect of the price of risk is that it’s a price that needs to be earned and financing growth is a complicated business that benefits from deep and steady pockets and we can see from the chart that the “gap” between the ambient stock prices and the price of risk is never so large that it can’t be earned in our lifetime.

Our estimate of the downside in the stock price due to the demonstrated volatility is minus ($8) per share so that it could be trading between the current $73 and $65 to $80 without surprise. And, as usual, safety first and there have been a number of opportunities to breach the stop/loss and buy back in at a lower price with the confidence that we are still trading above the price of risk.

Exhibit 1: (B)(N) TSCO Tractor Supply Company – Risk Price Chart

(B)(N) TSCO Tractor Supply Company

(B)(N) TSCO Tractor Supply Company

Tractor Supply is an operator of retail farm and ranch stores. The Company supplies the lifestyle needs of recreational farmers and ranchers and those who enjoy the rural lifestyle, as well as tradesmen and small businesses.

(Please Click on the Chart to make it larger if required.)

From the Company: Tractor Supply Company operates retail farm and ranch stores in the United States. Its stores provide a selection of merchandise, including equine, livestock, pet, and animal products, such as items for their health, care, growth, and containment; hardware, truck, towing, and tool products; seasonal products comprising lawn and garden items, power equipment, gifts, and toys; maintenance products for agricultural and rural use; and work/recreational clothing and footwear products. As of June 29, 2013, the company operated 1,223 stores in 46 states, as well as a Website under the TractorSupply.com name. It serves recreational farmers and ranchers, as well as tradesmen and small businesses. The company was founded in 1938, has 9,400 employees and is based in Brentwood, Tennessee.

For more information on the Chart Elements, please see our recent Post, The RiskWerk Company Glossary.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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