XHB

Housing Is Back! Trends in Home Improvement

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Housing prices are no longer in the dumps. What does this mean for the home improvement retailers, and how might other trends be helping to provide a positive industrywide backdrop? Both Home Depot and Lowes may be long-term winners, but valuation considerations shouldn’t be ignored. The Valuentum analyst team digs in. ~8 mins. If you cannot view the podcast below, please select the link here or view the transcript that follows. Chris Araos: Hello, this is Chris Araos at Valuentum Securities. With me are Kris Roseman and Brian Nelson. Today, we are going to focus on Home Depot (HD) and Lowes (LOW) and why they are doing so well. We have a strong housing market. New home sales have hit … Read more

Don’t Be Tempted By Homebuilders’ Dividends

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Image Source: Toll Brothers By Kris Rosemann The underproduction of homes since 2008 has created pent-up demand, providing a material tailwind for homebuilders as of late. According to estimates from Toll Brothers (TOL), the total estimated shortfall of housing starts from the period 2008-2014 was 5.7 million. That equates to an annual shortfall in production of ~818,000 new homes, providing significant opportunities for the homebuilding group as a whole moving forward. Pent-up housing demand has been accruing for years, and stronger general economic conditions, including lower unemployment, modest wage growth, and general consumer confidence continue to drive demand. A favorable jobs/wage market has the potential to provide a material boost for homebuilders, and additional demand could be found in the … Read more

When Do the Dark Days Return in Home Improvement?

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By Kris Rosemann Though there are many way to slice and dice the numbers, total employment continues to grow, helping consumers’ personal income levels, and gas prices have significantly reduced everyday expenses for the average American. Home improvement retail is benefiting materially, from our perspective, and we point to a number of trends that are driving Americans to spend more on their homes, “Is the Time Right to Invest in Home Improvement (Aug 2015).” Though many subdivisions across the country remain unfinished, “What’s the Deal with US Housing? (May 2015),” we’re even started to see life out of the builders in some previously abandoned areas. Things are looking up… Home Depot (HD) and Lowe’s (LOW) embraced the late-arriving winter last … Read more

Home Improvement Remains Strong

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The story for home improvement retail giants has remained largely unchanged in recent quarters. Demand for home improvement goods has been high, as has general housing demand. This has driven traffic increases for the likes of Home Depot (HD) and Lowe’s (LOW) thus far in 2015. Home Depot reported sales growing 6.4% from the year-ago period to $21.8 billion in its fiscal third quarter of 2015, and comparable store sales increased 5.1% in the quarter. The firm’s number of customer transactions advanced by 4.4% in the period, while its average ticket price grew nearly 1%. The company’s sales per square foot grew by more than 5% in the quarter on a year-over-year basis. Home Depot’s impressive top-line trends were mostly … Read more

Is the Time Right to Invest in Home Improvement?

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The US housing market has been hot this summer. Both purchases of previously-owned homes and residential housing starts reached their highest monthly levels in the month of July since 2007. The improved demand has been driven by a resilient labor market, historically-low mortgage rates and “pent-up” demand from the Great Recession. Purchases of previously-owned homes advanced 2% sequentially in July to an annualized rate of 5.59 million houses, handily beating consensus estimates of 5.43 million. The increased levels of demand come despite limited support from first-time buyers, however. Millennials, now coming of age, are making their first “rent-versus-buy” decisions, and many, having witnessed the housing bubble burst late last decade, aren’t viewing ownership as the wise investment decision that their … Read more

What’s The Deal with US Housing?

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Pictured: An unfinished sub-division in rural Illinois, May 2015. Springtime is here, and housing construction is booming. The US Census Bureau’s latest tally for the seasonally-adjusted annualized rate of housing starts in April came in at 1.14 million, up an incredible 20% from the revised March estimate of 944k (sequentially) and up 9% from the April 2014 rate (year-over-year). That’s some nice expansion, to say the least. Our long-held indirect plays on the US housing recovery have been a couple of ETFs, which focus on an improving consumer credit environment and incremental loan growth from the depths of the Financial Crisis. The two ETFs can be found in the Best Ideas Newsletter portfolio, and we continue to believe that they … Read more

The Correction: Surveying the Marketplace in 3 Charts

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For those just joining us, we’ve been profiling the market’s recent slide under the article series titled, The Correction. This article is the latest installment of the series. SPDR Select S&P 500 (SPY) Breaks Below 200-day Moving Average You can say what you want about technical analysis, but times have changed since strict fundamentalists started publishing that chart reading is taboo. There are industry veterans who grew up with the markets decades ago that still don’t buy into the discipline, but technical analysis has become a much-needed skill at any level. Why? Well, the more technicians and chart-followers there are, the more the markets behave according to that particular discipline. Remember: stock prices are driven by buying and selling of … Read more

Housing Remains Resilient; D.R. Horton Says Has “Pricing Power”

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On Tuesday, the US’ largest homebuilder, as measured by number of homes closed, revenue and pre-tax income, reported solid fiscal 2014 first-quarter results, lifting spirits across much of the industry. D.R. Horton’s (DHI) homebuilding revenue leapt 33% thanks primarily to a 19% increase in homes closed in the quarter and an average sales price increase of 10%, to $275,600. Home sales gross margin advanced 350 basis points, to 22.3%, helping drive a 76% increase in pre-tax income for the period. The company’s diluted earnings per share increased 80%, to $0.36. The pace of orders was also robust, jumping 14% in value to $1.5 billion and 4% in homes to 5,454. D.R. Horton’s sales order backlog also swelled 20% in value to … Read more

Why Valuation (Still) Matters: The Homebuilders

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At Valuentum, our stock-selection methodology blends two long-time investing foes—value and momentum (click for why this combination is so powerful). For an idea to fit the profile of a ‘Valuentum stock’, it simply cannot just be undervalued, nor can it exclusively possess fantastic momentum and technical measures. The firm must have both characteristics and pass the qualitative muster of our analyst team to make the cut for addition to our actively-managed portfolios. We credit the Valuentum discipline as the major driver behind the significant outperformance in our portfolios. In addition to highlighting one of the biggest industry collapses during the year (the mREITs—click here) and perhaps the biggest alpha trade (stock up, market down) of the year (Apple recently), the Valuentum process … Read more