For various reasons, many value investors shun technology companies. Warren Buffett says he can't understand them. I echo Mr. Buffett's sentiments. My other aversion is that they are too exciting. While I enjoy excitement in other parts of my life, in investing excitement tends to be expensive.

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By exciting, I mean that there is always change in the technology industry. Just look at Google (Nasdaq:GOOG) who many thought would always have a firm grip on internet search. While Google is still dominant, Microsoft (NYSE:MSFT) unveiled Bing, its new search engine. And wouldn't you know it that Google is tinkering with developing its own web browser to compete with Internet Explorer? In the technology space, there will always be serious competitive threats.

I Like Nuts and Bolts
Boredom is an investor's best friend. Businesses that do boring basic things often find themselves doing very well for very long periods of time often without threat of serious competition.

Look at Fastenal (Nasdaq:FAST), a retailer of bolts, nuts, rivets and other fastener products. You don't find too many folks wanting to sell bolts and nuts these days. But that's great for the folks at Fastenal.

Sales have grown at over 15% per year since 2005 and net income has grown from $166 million to $280 million over the same stretch. In fact sales have increased every single year since 1999, a decade which included two recessions. Earnings per share more than quadrupled. As for the stock price: around $10 in 1999 and $37 today, a decade when the S&P return was negative.

Growth Stock or Reasonable Growth Company?
At a P/E of 25, it's hard to call the company a bargain, but I doubt the need for screws and bolts is going away anytime soon. It's not hard to understand why: you can't find anything bad about this company. It's debt free, the return on equity is nearly 20%, and the current ratio is over 7.

Continued growth in profits over the years will increase the intrinsic value, making it a quality business today. Relatively speaking, Fastenal looks to be in a better proposition than fastener and screw-maker Simpson Manufacturing (NYSE:SSD). Simpson is valued at over 35 times earnings and a current ROE of 5%.

The Bottom Line
Fishing for investment candidates in boring places will likely turn over some interesting opportunities. People just don't want to talk about a bolt and screw maker at cocktail parties. They want to know when Google will hit $1000 a share. For me, I'm perfectly happy avoiding meaningless conservation and letting the results speak for themselves. (For more, see Introduction To Fundamental Analysis and the Ratio Analysis Tutorial.)

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Tickers in this Article: SSD, FAST, GOOG, MSFT

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