Discovering Tractor Supply

NEW YORK ( TheStreet) -- Why are mediocre stocks so popular when there are so many great ones out there ready to be discovered?

That is the one question I keep posing to myself day after day after looking at so many portfolios full of stocks like Cisco ( CSCO), Johnson & Johnson ( JNJ), Lowe's ( LOW), Intel ( INTC), Microsoft ( MSFT) and on and on.

They might be good companies: I shop at Lowe's. But if you are looking for growth or income or even just staying even with the market, they just are not going to do it for you anymore.

But investors keep stuffing them into their portfolios, and this has to be at least one reason why: No investment adviser ever got fired for recommending General Electric ( GE) or Wal-Mart ( WMT).

So most investors really have to make two decisions: Which stock to buy, and which guru to follow.

There's no doubt lots of investors feel way more comfortable with those big, stodgy names. Ditto for the televised pundits.

But some of these companies are so big, they have long since run out of room to grow. Attention Wal-Mart investors: I'm talking about you.

What about Tractor Supply ( TSCO)?

Unless you are reading my newsletter or listening to my radio show, you've probably never heard of it. The pundits are certainly not touting the fortunes of a TSCO, chain store whose major claim to fame is selling farm implements and goat food to yuppies.

If that is the case, you have missed out on one of the great stocks of the decade. A stock that continues to hit new all-time highs and blow away the performance of Lowe's and Home Depot ( HD), and is still a stock to consider.

Data from Best Stocks Now App

Performance: Over the last 10 years, TSCO has delivered total returns of almost 24% per year to investors while the market has delivered 5.4%. Over the last five years it has delivered 46% per year while the market has delivered only 8% during the same time frame. Over the last three years TSCO has delivered a whopping 51% per year to investors while the market has delivered 14%. Over the last 12 months, TSCO is up 37% while the market is only up 17%.

Data from Best Stocks Now App

I've interviewed the CEO of TSCO on my radio show. He may not get the attention of his lesser-performing colleagues, but he sure impressed our listeners with what he was doing to grow his company and its share price.

Valuation: But it doesn't all end with performance. Stocks also have to also make sense from a valuation standpoint. Now that doesn't mean I'm going to go eliminating biotech stocks from my list of companies I'd consider buying, but I also own boring stocks like TSCO.

The consensus analyst estimate for TSCO's earnings next year currently stand at $2.63 per share. The consensus average five-year earnings growth estimate for TSCO is 17% per year.

Given these expectations, the shares currently sport an okay PEG ratio of 1.50. PEG ratio is just one valuation measure, however.

When we take that estimate of $2.63 per share and extrapolate it out over the next five years, we come up with potential earnings per share of $4.94 five years from now.

When I apply a multiple that I think is appropriate for the shares, I come up with a five-year target price of $124 per share. With the stock currently trading at $68.27, I still see considerable upside potential.

Stock Chart: Lastly, TSCO has a very healthy one-year stock chart. See for yourself.

Courtesy of StockCharts.com

I may have never before seen a TSCO TV commercial, ad, or even a store, but TSCO's concept has obviously worked. Of the 3,567 stocks that I track, TSCO currently comes in at Number 8. It also earns a very hard-earned grade of A+. This represents the top 3% of the entire market. I only consider stocks that have a grade of A- or better. Tractor Supply easily makes the grade.

Data from Best Stocks Now App

TSCO is for moderate risk investors. I always have a well-diversified portfolio of 25 to 30 stocks to mitigate my risk. I am also very vigilant on daily basis on the stocks that I own. At the current time, clients of Gunderson Capital Management are long the stock.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.