Home Depot (HD)

A very well-run company, however valuation keeps him back a little. The tailwinds to the US housing market spending will continue, but he doesn’t believe the risk/return is good enough to warrant being in the stock today.

A play on the development of US housing. There is still a run rate that is less than adequate to satisfy the growth of population. The US is basically building 1-1.2 million new household formations each year, and they need closer to 1.5 million to keep up with the population growth. That will lead the housing market to do well, which leads this company to do well. This is also a play on home renovations. If some of the housing market doesn’t do so well, people will stay in their homes and fix them up. They have done a great job in enticing the professional builder into their stores. Their margins are very high, and have doubled over the last 6 years, which is really astounding. Dividend yield of 2.08%.

HD-N vs. V-N. Don’t focus on the current yield. He thinks V-N will deliver 20% dividend growth going forward. HD-N is also a high dividend grower. You need to decide which business you want. He would go with V-N because it is the largest electronic payment network in the world. They just completed the European acquisition and it should be very accretive.

The US housing market has really recovered, and in fact US home sales were the highest since before 2007. This is one of her favourites and strongest in the US housing sector. They have a lot of online sales.

(Market Call Minute.)

(Market Call Minute.) This is a play on the US housing market. household formation and employment improvement. They have a very good capital program.

He is very keen on the whole building business in the US. The existing home business is about 90% of the activity, so with people’s rising income and the rising equity in their homes, and an increasing number looking at renovations, this is right up this company’s alley. Looking out 2-3 years, this is going to be a huge winner. Dividend yield of 2.21%. (On his 3 top picks, he would not necessarily Buy now, but watch the markets for your entry point.)

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.