Home Depot (HD)

Home building and new home sales in the US have just skyrocketed. Last month, new home sales increased by 15%. Also, existing home sales are increasing. Executing very well and are able to beat their estimates. She sees this as a non-performer over the next year. Prefers this over Lowes (LOW-N) slightly more.

He loves this company. Homebuilders and the housing market are going to continue to do well in the US. Because of that, this company will do well. (See Top Picks.)

A lot of consumer spending is on the home. A lot of good stuff is happening in this company. They are executing very well. Growth has been great. The valuation is what is keeping her on the sidelines.

(A Top Pick Aug 21/15. Up 15.92%.) Feels very comfortable with this. It just continues to tick along in the band of top growth rate. US housing market is doing really well and this feeds into both sides of this company, the Pro and the DYI.

This is really a play on the US economy, a recovery in the US housing market, improving employment, which implies higher household formations and turnover. This is a format that is not threatened by on-line like other businesses. Online represents about 5% of their total revenues. Dividend yield of 2.1%.

(A Top Pick May 5/15. Up 26.91%.), Have doubled their net profit margin over the last 7 years. Same-store sales are at around 7%, and total sales at around 10%. With low interest rates, people are forming homes at a faster rate. The company is in new homes as well as renovations and repairs.

Construction and home improvement have been two of the biggest hiring areas. HD-Ns free cash flow growth has been stellar at 12%. The dividend has been growing at 13% with Cap X at 10% growth.

(A Top Pick Nov 17/15. Down 0.43%.) Broadly speaking, the home-improvement theme is very durable and has a lot of legs. This has the best in class management, best in class balance sheet and is a very lean well positioned operator. Will be doing a buyback.

The parts of the US economy that are showing strength, the improvement sector is one. With the multiple it is trading at, she is playing the housing strength in different ways.

This is at a sweet spot. Well managed. Household formations are not keeping up with population growth, so there is a lot of runway in front of them. Unemployment is coming down. Interest rates are low. They are moving very effectively into the professional market. Return on Capital is up 32%, a tremendous financial performance. Dividend yield of 1.95%.

A very good operator and capital allocator. Primarily US at about 90%. The rest is Canada and Mexico. This is a play on the US economy. The consumer is healthy, employment is healthy. When people feel better they spend more on their home. When the job market is robust, they tend to move. Housing starts are still way below normalized levels, and should slowly improve. They always pay out 2% of their earnings in dividends. Dividend yield of 2.07%.

A premier buildings product company. Prefers it 5% cheaper. Great company that generates a lot of free cash flow and consistently raises its dividend. Dividend yield of 1.9%.

Positioned well as they have exposure to the new home market and the renovation market. The housing cycle in the US is certainly better than it is in Canada and other global countries. Lower oil prices will benefit them in terms of additional consumer spending.

A play on the US economy including a recovery in housing, strong employment and improving consumer confidence. They are using 2.5% GDP growth over the next few years and feels there is still a lot of room to grow. Private and fixed residential investment as a percentage of GDP is about 3.4%, but the long-term average is 4.5%, indicating people are still underspending in this area. About two thirds of housing stock in the US is over 27 years old, so there is going to be increasing demand for repair/renovations. Post the recession in 2008-2009, about a 3^rd of the population of 18-27 year olds are still living at home. As employment improves, household formation should increase, which will be beneficial. They are also focusing on increasing online sales, as well as their professional customer, which is only 5% of their customer base, but accounts for over 30% of revenues. Anticipates a dividend increase this year. Dividend yield of 1.85%.

(A Top Pick Aug 21/15. Up 13.70%.) This has great demographics behind it. We have a cyclical low in home ownership rates. Home ownership is on the rise and rates are very favourable. Good demographics.