Welcome!

In the last weeks we've been to Dublin, Osaka, and Jakarta. Today we are back in North America. The ticker has landed on a business that quietly sits at the centre of a global marketplace most people have never thought about. You've almost certainly seen the product it sells. You had no idea who was selling it.

Before we dive in, a reminder of what the index itself has delivered over time.

Every week, we pull one company at random from the FTSE All-World with ~4,200 companies representing 90% of global stock market wealth. We share the index's long-term returns as a reminder of why we're here: the long game. New to the newsletter? Start here.

Founded in 1982 in Vallejo, California. Listed on the NASDAQ.

Think back to the last time you saw a badly damaged car on the side of the road. The insurance company declared it a total loss. Someone towed it away. And then what?

Chances are, it ended up in a Copart yard.

A few key facts:

We'll come back to that thirty-seven percent operating margin in a moment.

When a car is written off by an insurance company, it needs somewhere to go. Copart picks it up, tows it to one of their yards, photographs it in detail, and lists it on their online auction platform. Then buyers from around the world bid on it.

Dismantlers who want the parts. Rebuilders who will repair and resell. Exporters shipping cars to markets in Nigeria, Poland, or the UAE. Copart collects fees from both sides: the seller and the buyer. It never actually owns most of the vehicles. It is the marketplace.

In FY2025, 81% of the vehicles it processed came from insurance companies. And 38.8% of US vehicles were purchased by international buyers. A totalled Honda in Texas gets bid on by a dismantler in Eastern Europe. That's the scale of the network they've built.

Willis Johnson grew up poor in Sacramento. As a teenager, he worked in a wrecking yard. At 24, he bought a single salvage yard with borrowed money.

He spent twelve years building a regional network in California, then took the company public in 1994. The IPO gave him capital for two acquisitions that changed everything: North Texas Salvage Pool, the largest salvage seller in the US, and NER Auction Group, which doubled Copart's footprint overnight.

But the real strategic move came around the turn of the millennium. Johnson looked at the internet and immediately understood: instead of regional physical auctions where buyers had to travel to a yard, why not put every vehicle online so every buyer in the world could bid on every car? Competitors kept running physical auctions for years longer. Copart never looked back.

His son-in-law Jay Adair is now CEO. Willis Johnson remains executive chairman.

Most discussions of Copart focus on its technology. The deeper moat is something less obvious: the land.

Copart owns the majority of its storage facilities rather than leasing them. You cannot open a salvage yard next door to Copart in most US cities. Zoning restrictions on storing damaged vehicles are strict. Environmental regulations are strict. Community opposition is fierce. Getting permits takes years and often fails entirely.

A competitor can build better software. They cannot easily build 200+ operational, permitted storage yards across the US and internationally. And because the land was acquired over decades at historical cost, the balance sheet significantly understates its real value today.

The network reinforces this. More insurance sellers attract more buyers. More buyers competing means higher auction prices. Higher prices attract more insurance companies. Today Copart has approximately one million registered buyers in 170+ countries. Each new vehicle makes the platform more attractive to buyers. Each new buyer makes it more valuable to sellers.

Most auction or logistics businesses earn operating margins of 5–15%. Copart earns 37%.

In the US and most international markets, Copart acts purely as an agent. It processes the vehicle, runs the auction, collects fees. It doesn't buy inventory. Capital expenditure is modest relative to revenue. The physical yards are costly to build, but once operational they generate high returns for decades.

The result: $4.6B in revenue, $1.7B in operating income, and $1.26B in free cash flow in FY2025. The balance sheet carries approximately $5.2B in cash and minimal debt. The company's profit per share has compounded at roughly 22% per year over the past decade. Since the IPO in 1994, the stock has returned +21,857%.

Modern cars are increasingly expensive to repair. Unibody construction with exotic metals. Crumple zones. Airbags. Adaptive headlights. Backup cameras. Lane departure warnings, collision detection, blind spot sensors.

All of these make a modern car more expensive to fix after even a modest accident. The repair cost crosses the total-loss threshold more readily than it did on older vehicles. This structurally increases the volume of cars flowing to Copart over time, independent of how many accidents actually occur. EVs push this further: when a battery pack costs $15,000 to replace and the car is worth $25,000, it gets totalled.

After years of strong growth, Copart's volumes have softened. The reason is counterintuitive: years of insurance premium inflation pushed some drivers to drop their coverage. Fewer insured drivers means fewer total losses flowing to Copart.

The stock hit an all-time high above $63 in May 2025 and has since fallen roughly 47%, sitting around $33 at the time of writing in April 2026. Management believes the volume decline is cyclical. Insurance coverage tends to recover as premiums stabilise. The business model, the margins, the balance sheet, and the competitive position are unchanged.

$10,000 invested at the IPO would be worth over $2 million today. In a company that runs salvage yards.

We're glad it's in our portfolio. We had absolutely no idea it was in there. Did you?

Data and images sourced from Copart 10-K for fiscal year ended July 31, 2025, and Copart Sustainability Report.

Next week, we'll be looking at a company from Europe.