La-Z-Boy Inc. (LZB)

A derivative play on the housing recovery. This company does well when the housing market does well. They are managing their business very well. Not only growing revenue, but are expanding margin. He is expecting about a 250 basis point expansion and margin over the next few years, which will go straight to profits, because it is operating leverage. Dividend yield of 1.17%.

(A Top Pick April 30/14. Up 10.58%.) Bought this basically on the back of what he expected and still expects, i.e. a long term secular move in terms of the housing market and household formation. Looking at statistics, household formation in the US right now is running somewhere around $1 million a year, and the run rate of $1.5 million a year is needed to keep up with the immigration and population growth. Well-managed and produce a good product. Have done well and thinks they will do better.

A bit of a play on the household formation theme. As you have people forming households, they are buying furniture. This has been a well managed company. They are working to reinvent themselves a little. Sold their Bauhaus division and have brought Brooke Shields into their ads which he sees as an attempt to take the old man’s chair and revitalize it a little. It is certainly working. Has about a 5% free cash flow yield and earnings growth is pretty robust. Yield of 1%.