In this blog, I used the example of Copart, precisely because I believe that it contains the elements that make up a high-quality company. Copart (“CPRT”) is the world’s largest salvage auctioneer.
The company went public in March 1994 at a price of $12. Considering stock splits that have taken place since that date, the stock’s initial price is $0.25 per share. The stock’s compound annual return has therefore been 21.2% since March 1994. An initial investment of $10,000 would be worth close to $2.5 million today!
However, I have just finished the book “Gold to Junk” written by Willis Johnson, the founder of Copart. Since COTE 100 has shares of Copart in its portfolios under management, I may be biased. Still, it seems to me that Mr. Johnson’s book should be read by any investor looking to learn about the best entrepreneurs and the companies that have had great stock market success over a long period of time. In my ranking system of the books I’ve read, I gave this book five out of five stars.
Here are just a few of the many lessons Mr. Johnson shares with us:
⁃ “Take care of pennies and your dollars will take care of themselves”. This quote comes from Mr. Johnson’s father, an entrepreneur himself, who has always paid close attention to superfluous spending.
⁃ “If you take care of your business, it will take care of you.” This quote is also from Mr. Johnson’s father, Mr. Willis Johnson senior. I understand that an entrepreneur must take care of his business with passion. In return, it will be able to experience success.
⁃ Only hard work leads to long-term success. Mr. Johnson’s success story is one of many years of hard work.
⁃ No need for a university education to succeed in business. Neither Mr. Johnson nor his successor and son-in-law, Jay Adair, went to college.
⁃ You have to be opportunistic. Mr. Johnson has repeatedly demonstrated his ability to make quick decisions when opportunities have presented themselves. But he was prepared and informed beforehand. For example, when acquiring a damaged car storage yard, he was able to submit a higher purchase offer than other buyers, but after taking an inventory of all the vehicles in the yard.
⁃ Don’t be afraid to get your hands dirty. A true entrepreneur like Mr. Johnson is willing to do anything for the good of his business or to serve a client well.
⁃ Be ready to innovate and go against the current. Copart was the first company in its industry to offer only online auctions and not physical ones. Copart’s online auctions began in 1998, at the start of the corporate shift to the web.
⁃ Invest for the long term. Between 1995 and 1998, Copart invested $3 million, a substantial sum at the time and surely a brake on the growth of its profits, in a computer system for managing its inventory and all its activities. This system allowed it to continue to grow over the next many years.
⁃ Admit mistakes and learn. In 1995, the company began to buy and sell on its own account the damaged vehicles of its customers, the insurers. Its executives soon realized this was a mistake and reverted to Copart acting as an agent for insurers, without taking possession of the vehicles.
⁃ Know when to let go. After building a strong management team, Mr. Johnson was humble enough to step down from operations in the business. By 2009, Mr. Johnson had retired completely, which hasn’t stopped Copart from continuing to grow over the past 13 years.
In my opinion, there are important similarities between entrepreneurs who are very successful in business. Mr. Johnson’s book presents several of these qualities.
