The Conservative Investor Digest

One of the underrated areas of the industrial economy where shareholders have made a lot of money over the years is used auto repair shops. It may not look like the sexiest business, but the returns have been excellent. The gap between what mechanics are paid and what customers are charged, the gap between the cost of repair parts to the shop and the price customers pay, and the generally efficient use of real estate has proven an excellent recipe for market-beating returns for consistently long periods of time.

Just look at the large-caps in the industry like Autozone or O’Reilly. Autozone has delivered 20% returns since 1991, turning a $25,000 investment into over $2 million. O’Reilly has delivered 22% annual returns since 1993, turning a $25,000 investment into $2.1 million. A whole lot of money gets made fixing cars.

For this month’s edition, I found one of the smaller companies in the industry that has delivered nearly 23% returns since the present management team took over in 1999. Even before that, things weren’t exactly mediocre—it had delivered 15% annual returns during the period leading up to the current management team’s takeover.

It has a lot of distinguishing characteristics that make it an excellent investment—effective acquisitions, double-digit revenue growth, special circumstances regarding the warehouse facilities that make it a lower cost operator than peers Autozone and O’Reilly, and the best part of all: No meaningful share dilution throughout these acquisition sprees so the shareholders have been able to reap nearly the full results of the growth.

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