Investors have already started making moves on the basis of positioning
themselves for the expected recovery in U.S. housing, but the leading
tool company Stanley Black & Decker (NYSE:SWK) has yet to really go along for the ride. While housing-related stocks like Louisiana-Pacific (NYSE:LPX) and Mohawk (NYSE:MHK) have both nearly doubled over the past two years, Stanley Black & Decker stock is basically where it started.
Some of the lagging performance can be explained with stubbornly low
margins and an increasingly debt-heavy balance sheet. At the same time,
management has sold some of its housing-related assets and acquired an
industrial fasteners business that offers uncertain long-term margins
and cash flows at this point. All told, Stanley Black & Decker's
stock is a curious proposition – while it is hard to argue that the
shares are cheap on the basis of what we've seen recently, a strong
recovery in the North American construction market coupled with a return
to double-digit free cash flow margins would likely be powerful drivers for the stock.
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