LKEN WOLTER | DREAMSTIME
Was 2015 another year of poor to middling investment returns for you as it was for me, making retirement or college savings a little more stressful?
Oh, if we could only have bought into that hot IPO, that exclusive hedge fund, those commodity and currency options, that insider newsletter, or that Chinese online outfit that made so many headlines. And if the darn Fed hadn’t kept interest rates so low. And if the global oil market hadn’t collapsed. And if China hadn’t done whatever it was that China did. So unfair.
Actually, not. For the fifteenth year in a row, opportunity was right under our noses and probably right down the street in that Memphis-based company with the orange, black, and red signs: AutoZone. The great secret: People like to hang on to their cars and trucks, and they like to fix them, customize them, and clean them. There’s gold in them there spark plugs, wipers, batteries, and waxes.
AutoZone (AZO) stock was up 23 percent for the year as of mid-December, nearly matching its 15-year annualized return. If you had bought 1,000 shares of AutoZone on January 2, 2001, for $25,000 that would be worth $775,000 today. Not a 10-bagger, not a 20-bagger, but a 30-bagger. An investment worth 30 times what you paid for it.
Welcome to AutoZone indeed.
The road to riches ran right through Memphis, with a simple buy-and-hold strategy. Or, in this case, buy, hold, and celebrate. The stock is easy to track. No splits, no dividends, no management fees, and a chart that just keeps climbing. There have only been two years since 2001 when it went down, and in each case that was less than 2 percent while most stocks were down much more.
No Memphis-based public company or mutual fund open to ordinary investors has come close to that performance over 15 years, 10 years, or 5 years. During those time frames, AutoZone has also outperformed Warren Buffett’s Berkshire Hathaway, Microsoft, Starbucks, and the S&P 500.
The standard caveat is that past performance is no guarantee of future returns. Market sectors fall in and out of favor every year or so. To make an investment look good (or bad) you need only select the right starting point. The high-flyers could crash this year, or next year. But 15 years of performance is hard to ignore. That time frame includes 9/11, Katrina, W., Obama, the housing crash, the credit crisis, the great recession, wars in Iraq and Afghanistan, low interest rates, high interest rates, $4 a gallon gas and $2 a gallon gas, $140 a barrel oil and $40 a barrel oil, Dow 18,000 and Dow 7,000, the strong dollar and the weak dollar, the bankruptcies of Detroit and Lehman Brothers, and the Greek bailout.
All of those events (“headwinds” as the analysts say) sent the stock market into a tailspin. Some of them supposedly foreshadowed “seismic shifts” in the stock market. But a handful of companies kept chugging along and delivering outsized returns year after year. They were news-proof. Interestingly, another standout was Kroger, based in Cincinnati but as commonplace in Memphis as AutoZone stores. Kroger was up 33 percent in 2015 and its five-year annualized return is 32 percent.
Their performance challenges conventional wisdom about the value of diversification and the need to scour the world for money-making opportunities.
Well, what goes up must come down. This could be the year AutoZone takes a big fall. Which is what skeptics have been saying for the last 15 years.