Among the many industries dragged down the weakness of the global economy during the financial crisis and Great Recession, the entire construction sector was pulled down even more than the broader market. 

#-ad_banner-#Shares of leading equipment maker Caterpillar (NYSE: CAT) traded as low as $24 in 2009, down 70% from its 2008 high. Deere & Co. (NYSE: DE) tumbled 65% from its high during the financial crisis. In comparison, the S&P 500 Index was down 55% — a whopping figure, but less than these construction names.

However, there is stock that is often lumped in with the major construction stocks when it’s actually a retailer. Shares of this company have held up nicely despite the market weakness that crippled the construction sector. 

Shares of Tractor Supply Co. (Nasdaq: TSCO) fell 30% from its peak in 2008 — but since then, shares are up nearly tenfold:

TSCO data by YCharts

One of the nation’s leading retailers of farming and garden-related products, Tractor Supply is easily overlooked, in part, because it caters to only a handful of shoppers, unlike Wal-Mart (NYSE: WMT).

However, Tractor Supply is the go-to spot for farmers and ranchers, and that loyal following lends itself to a recurring revenue stream. The retail farming business is very resilient, and there’s nothing to suggest this will change anytime soon. 

Shares are down over 15% this year. Last quarter came in weak for the company, with earnings missing consensus by 5%. Despite this, TSCO’s pullback could be a great buying opportunity.

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	Flickr/leyink
	Tractor Supply has a store base of just over 1,300. It’s planning to open just over 100 stores this year, with a long-term target of 2,100 stores.

Comparable-store sales were actually up 2.2%, but this was a decline from the 3.5% growth in the previous quarter. The biggest issues appeared to be the severe winter weather and costs from the opening of a distribution center. Despite this, the company still managed to attract shoppers. Store traffic grew for the 24th consecutive quarter. 

No other retailer offers a similar product line. Sears Hometown and Outlet Stores (Nasdaq: SHOS) sells certain hardware and gardening products, but they primarily cater to everyday consumers and not farmers. There is Lowe’s (NYSE: LOW) and Home Depot (NYSE: HD), but Tractor Supply has fended off competition from these two by focusing on smaller, rural markets. 

In addition to its cultlike following from farmers, there’s still room for store growth. Its margins are impressive for a retailer, with a profit margin of over 6% for the trailing 12 months. Neither Sears Hometown nor Wal-Mart can rival Tractor Supply’s margins. Tractor Supply also has negligible debt and a return on investment that’s close to 30%. 

You won’t get a return on investment as strong as Tractor Supply’s from any of those other retailers — in fact, not even Apple (Nasdaq: AAPL) produces as strong a return on investment as Tractor Supply.

Tractor Supply has a store base of just over 1,300. It’s planning to open just over 100 stores this year, with a long-term target of 2,100 stores. The focus will be on expanding outside of its core markets in the Midwest and southern U.S. But adding more stores isn’t Tractor Supply’s only growth opportunity. The company will be opening smaller stores and converting some older stores to larger formats to better meet customers’ needs in key markets. 

With its superior position in the market, Tractor Supply has historically traded at a premium. Its five-year average price-to-earnings ratio (P/E) is 24, but TSCO is trading at a forward P/E multiple of 21 based on next year’s expected earnings. The stock pays a slim 1% dividend yield, but with the company’s cash flow and low payout ratio of 22%, there’s room for growth.

Risks to Consider: Despite its resiliency during the last financial crisis, an economic slowdown will undoubtedly have an impact on the company’s sales. The biggest issue is competition, should either Home Depot or Wal-Mart gain traction with their smaller store formats, they could look to push into Tractor Supply’s markets.

Action to take –> Buy Tractor Supply as a long-term investment. Shares are 15% off their 52-week high from a few months ago, but Wall Street’s consensus price target is $76. That’s 18% upside. And of the 26 analyst ratings on the stock, none are a “sell.”

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