Some more investing talk for you. Building products are tied to the housing market, providing products for remodeling and new construction. This year we’ve seen a turn in the market, the changes that the US Federal Reserve has stimulated with quantitative easing. Housing prices are rising, with some increases quite dramatic. For example, home prices rose 27% in Nevada, California up 23% and Arizona gained 17%. Completed foreclosures dropped by 25%. In August. 47% of sellers raised their prices, 48% held prices steady and 5% lowered their prices.
At the same time we’ve seen a spike up in interest rates, with 30 year fixed loans rising from 3.35% to 4.57%. This has put a damper on home sales in the latest August numbers. Buyer traffic has dropped in August to 45.2 from 52.9 in July. A reading of 50 means that it meets agents’ expectations. Jed Kilko, Chief Economist with Trulia studied past recoveries and found that the market slowed down for approximately three months following the peak in prices and rates. After that time the market resumed its upward momentum, especially if the general economy was also rising. If we take the July numbers as the peak, we can look for a decline followed by stabilization and a resumption of the upward trend.
With this background, we look at stocks in the building products sector.
Here are some of the leaders: (Barcharts.com)
· Jewett-Cameron Trading (JCTCF) $13.00. Year’s high/low is $13.88/$5.57. EPS = .87. P/E Ratio 14.86 Mkt. Cap 40.66 m.
Supplies “Value Added” building materials to home improvement centers, mainly in the Western US.
· Lumber Liquidators (LL) $107.43 Year’s high/low is $110.45/$47.31. EPS is 2.27, P/E Ratio 47.54 Mkt. Cap $2.95 b. Lumber Liquidators is a specialty retailer of hardwood flooring with 100 stores across the US, a Call Center, website and catalog. Supplies pre finished and finished flooring, moldings, noise reducing under lays and adhesives.
· Tile Shop Holdings (TTS) $25.46. Year’s high/low $30.88/$12.00. Tile Shop manufactures stone tiles, sealing and maintenance materials and related accessories in the US, It makes stone, ceramic, porcelain, glass and metal products.
· Lowe’s Companies (LOW) $46.86. Year’s high/low $47.58/$28.85. EPS 2.03 P/E ratio 23.15 Dividend .72(Yield 1.53%) Mkt. Cap. 50.25 b.
Lowe’s Cos. sells retail, do-it-yourself and commercial business services. Products include home décor, home improvement, home repair and remodeling and maintenance of commercial buildings.
· Home Depot (HD) $75.11. Year’s high/low $86.56/$58.51. EPS 3.48. P/E ratio 21.67. Dividend $1.56 (Yield 2.07%). Mkt. Cap. 109.72 b.
Home Depot supplies industrial and construction supplies in the US, Canada, Chile, Puerto Rico and Argentina.
· Fastenal Company (FAST) $50.08. Year’s high/low $53.38/$40.00. EPS 1.48. P/E ratio 22.89 Mkt. Cap. 14.86 b.
Fastenal produces industrial and construction supplies in 11 product lines. Products include threaded fasteners, tools, metal cutting tools, blades, blade re-sharpening, fluid transfer components, electrical supplies, welding supplies, accessories for hydraulic and pneumatic power materials and janitorial and paper supplies.
· Beacon Roofing Supplies (BECN) $35.21. Year’s high/low $42.70/$26.96. EPS 1.50. P/E ratio 23.42. Mkt. Cap 1.71 b.
The company is one of the largest distributors of residential and non-residential roofing materials in the US and Canada.
· Building Firstsource (BLDR) $5.70. Year’s high/low $7.33/$4.27. EPS .21 Mkt. Cap. 553.41 m.
The company supplies structural building products for residential ad new construction in the US. Products include roof and floor trusses, aluminum and vinyl windows, custom millwork and pre hung doors.
The above discussion is neither a recommendation to buy nor to sell these securities. You must always do your own detailed research.