Fastenal Still The Best House On The Block, But The Neighborhood Isn't Looking So Good

Without having seen Grainger's (GWW) results yet, I feel pretty confident in assuming that Fastenal (FAST) will come out of this quarter with the best set of results among the large industrial distributors. Although Fastenal is seeing worse gross margin pressure than MSC Industrial (MSM), they're growing their business more effectively and offsetting gross margin pressures with strong execution on operating expense items - something MSC has long promised, but that Fastenal actually delivers.

I don't think there's much argument now that industrial end-markets are slowing, and so too is non-residential construction. That still leaves plenty of debate for how much worse things will get, as Fastenal management maintains that the broad "general industrial" category is still holding up well. Either way, I'm not inclined to pay the premium valuation that Fastenal shares carry today; I do think Fastenal is an exceptionally well-run company (and exceptional companies deserve premiums), but I don't like paying up for companies with deteriorating end-markets.

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Fastenal Still The Best House On The Block, But The Neighborhood Isn't Looking So Good