Take a moment to consider what people have been doing the past couple weeks. The average person has been stuck at home, watching TV, surfing the web, playing video games and working on his or her house.
With all this time at home they are no doubt looking around considering a wide array of home improvements to make their living space more enjoyable. Now add the soon to come stimulus checks to turn those dreams into reality. That is why home improvement stocks has been one of the most resilient groups in the face of the Coronavirus bear market.
So let’s pull back the tarp and explore the 4 best stocks in the group: Home Depot (HD), Lowe’s (LOW), Floor & Décor (FND) and Sherwin Williams (SHW).
Home Depot (HD)
The first company that comes to mind when thinking of home improvement is the Home Depot (HD). That is because HD has one of the most consistent year over year growth profiles which explains why shares have doubled over the past 5 years (it was well over 100% before the bear took a bite out of HD shares recently).
HD is a good chunk off its 52-week high of $247. And it may take some time to get back to that level. However, just yesterday the analyst at Loop Capital Markets had no problem reiterating her Buy on HD with a still attractive $235 target. The current price of $190 may not mark bottom for HD. However, for those with long term aspirations it is hard arguing with this entry price for HD for the likely gains that will unfold in the years ahead.
Though few people know it, LOW actually has nearly the same number of stores as HD. So LOW should benefit from the government-provided economic stimulus checks just as much as HD.
LOW’s new CEO, Marvin Ellison, jumped from JCPenney’s sinking ship to try his hand at the home improvement industry. Though this executive addition does not exactly inspire investor confidence, Ellison’s push to capture market share in categories previously neglected by LOW brass (such as the professional contracting space) has a good chance to pay off. Furthermore, Low’s predicted profit growth rate is two times that of HD. That is why average target price for LOW points to about 40% upside at this time. Meaning that LOW is a case of a touch more risk than HD, but with commensurate increase in potential reward.
Floor & Decor (FND)
Make no mistake about it: we are in the midst of a bear market. This is a time to search for quality companies that have the potential to hold steady or possibly thrive amidst the uncertainty. For that reason FND is a very appealing stock to consider especially given the positive trends for the home improvement industry.
FND is really one of the hidden gems of the group. Because at only $3 billion market cap FND is hidden from most investors view as they focus on the likes of HD and LOW. But when you see their just as impressive consistent growth of the past, along with an even more appealing value proposition with 77% upside to fair value target of $58.79, then you fully appreciate the very attractive investment potential.
Plenty of homeowners have spent countless hours indoors in recent weeks, likely taking notice of peeling and fading indoor paint. And as the weather gets warmer they will go outside their home and start to notice the sad state of the exterior paint. Now mix in the Coronavirus stimulus checks and voila you have a recipe to benefit paint companies like SHW.
Well before the Coronavirus, this was a steady as you go growth and income stock. Now SHW is a good spot off its 52 week high a tick under $600 all the way down to $459. Just getting back to the pre-bear level should make most investors appreciate the appeal of SHW. However, with that next bull market and economic expansion will come even more growth. So do consider this to be a great time to buy SHW for a long, steady ride of outperformance as they have provided in years past.
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More Resources for the Stocks in this Article
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|LOW||Get Rating||Get Rating||Get Rating|
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