HD Supply Looking To Potentially Play Multiple Trump

While the recent downturn hammered industrial-exposed distributors like MSC Industrial (NYSE:MSM), Fastenal (NASDAQ:FAST), and Grainger (NYSE:GWW), HD Supply (NASDAQ:HDS) was more or less able to go about its business and continue growing. Due to its much different end-market exposures (facilities maintenance, water, and construction), HD Supply has continued to grow revenue and expand its margins, leading to a meaningful outperformance over the last three years relative to the likes of MSC, Fastenal, Grainger, and Wolseley (OTCQX:WOSYY) (with which it shares more in common).

Looking ahead, even though non-residential construction seems to be slowing and water infrastructure spending continues to click along at a slow pace that frustrates its bulls, I think HD Supply could still have potential catalysts to drive higher revenue and earnings. HD Supply would be a meaningful beneficiary of a lower corporate tax rate and would likewise be well-placed to benefit from the incoming administration's pledges to significantly increase federal spending on infrastructure. Projecting real numbers on the basis of campaign pledges is always a tricky business, and I haven't changed my tax rate assumptions yet, but if this administration delivers, it could support a fair value of $50 or higher for this distributor.

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HD Supply Looking To Potentially Play Multiple Trump

Seeking Alpha: Techtronic Still Worth A Look As A Housing Recovery Play

My Top Idea call on August 20, 2013 to buy Techtronic (OTCPK:TTNDY) worked okay for a while, as the stock rose almost 20% through to year-end. Shortly thereafter, worries about the soundness of the housing play as an investing them started to creep into the market, stimulated by weaker housing starts and existing sales and worries about the economy as a whole. That took a lot of the steam out of Techtronic, as well as rival Stanley Black & Decker (SWK) and major retailing partner Home Depot (HD).

I believe the Techtronic story remains an appealing one. Techtronic has been a share-gainer in the U.S. with its Ryobi and Milwaukee tool lines, and still has yet to really address the European or major emerging markets in a big way. Likewise, I continue to believe that the company can do better with its floor care business, with a resulting uplift to margins. With margins and returns on capital heading in the right direction and a housing market only in the early phases of recovery, I still believe Techtronic has a lot to offer at these levels.

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Techtronic Still Worth A Look As A Housing Recovery Play

Investopedia: A Solid Beat-And-Raise As Lowe's Closes Some Of The Gap

While neither Home Depot (NYSE:HD) nor Lowe's (NYSE:LOW) were exactly what I thought of as “cheap” a quarter ago, I did think Lowe's looked like the better buy as I believed the Street would start factoring in improving operations and more HD-like performance. That call seems to have worked out, as Lowe's shares outperformed Home Depot by nearly 15% over the last quarter. As Lowe's still looks cheaper than Home Depot and has more upside to operational improvements/outperformance, I would probably stick with Lowe's over Home Depot, but almost anything house-related in retailing seems strong these days.

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Investopedia: Canadian Dilution And Sluggish U.S. Shopping Bring Target A Little Wide Of The Mark

When Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Costco (Nasdaq:COST) all see relatively uninspiring same-store sales growth trends, I think it's safe to say the U.S. retail market is not in the best of health. Although Target continues to take steps that should improve the company's long-term competitiveness and growth profile, Wall Street is generally very much focused on the now and underperformance creates some challenges for the shares.

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Investopedia: Home Depot Moves From Good To Great

While it shouldn't really surprise anybody if there's a little volatility or turbulence along the way, it looks like the long-awaited remodeling upturn is firmly in place now. Not only did Home Depot (NYSE:HD) trounce expectations for same-store sales growth, but companies like American Woodmark (Nasdaq: AMWD), RPM (NYSE:RPM), and Stanley Black & Decker (NYSE:SWK) are seeing improved prospects as well. While these shares didn't do much over the last three months and the valuation is not what I'd call “screaming bargain”, I wouldn't step in front of the momentum with my own money.

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Seeking Alpha: American Vanguard Should Reap A Better Multiple

American Vanguard (AVD) has long been a volatile small-cap stock. Some of that can be chalked up to the vagaries of the agricultural chemicals market, a business where the likes of FMC Corp. (FMC) have also had ample ups and downs. Some of it, too, can be attributed to the fact that investors in agricultural stocks often seem to look and think no further than the next harvest, so planting, weather, and harvest data can make these stocks move in the opposite direction of fundamentals.

To that end, I think it's worth checking out American Vanguard today. Although I do have some long-term concerns about the company's position vis a vis new GM crops that target lucrative parts of the company's business, I believe there's a very good chance that the stock will deliver stronger results in the short term as capacity upgrades and strong marketing support from partner Monsanto (MON) lead to much better herbicide and pesticide sales.

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Investopedia: Lowe's Had Better Start Improving

It seems like a fuzzy memory now, but Lowe's (NYSE:LOW) was once seen as the superior operator to Home Depot (NYSE:HD) on the big-box home improvement battleground. Times have definitely changed, though, as Home Depot has gained an edge not only with its store locations (more stores in or near urban centers), but also with its merchandising. Making matters worse, Home Depot has significantly closed the gap (if not leapfrogged) Lowe's in an area where Lowe's once dominated – back-office logistics and cost management.

Even if Home Depot has been operationally de-pantsing Lowe's recently, it doesn't show up in the stocks over the last year – they both have nearly equal 60%-plus gains to their credit. Look at the two-year, five-year, or 10-year comparisons, though, and you see a wide gap between the performance of Home Depot and Lowe's (in favor of Home Depot). While there is a lot that Lowe's could do to close the gap and be a relative out-performer, the real question has to be “will they?”

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Investopedia: After A Big Rally, It's Up To Renew Blue For Best Buy

It wasn't so long again when the buy/avoid decision on Best Buy (NYSE:BBY) came down to the relatively simple discussion of whether you thought the company would be able to stabilize and continue on (with zero growth) or perpetually decline. With the shares up almost 50% from last year and 100% from the late December 2012 lows, now the question has shifted to how much growth the company's restructuring efforts will produce.

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Investopedia: Home Depot Continues To Rack Up Impressive Numbers

When a company finally gets its operational ducks in a row, the performance can be impressive. Couple that with a rising tide of improving underlying conditions, and the performance can be exceptional. That's the basic thesis on Home Depot (NYSE:HD) these days, as operational improvements started years ago are really bearing fruit and the company is starting to see the positive impact of improving housing markets.

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Investopedia: Toro And The Runaway Recovery

Wall Street is always looking for a rebound play, and there has been no shortage of interest in going long on the housing/consumer recovery this year. While data from home improvement superstores like Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) does indeed support the idea that the worst has passed, investors have been pretty aggressive in bidding up many residential housing plays. Toro (NYSE:TTC) remains a top-notch manufacturing company, but absent a buyout bid, it seems hard to see how cash flow is going to grow fast enough to leave much upside on the table for today's buyers.

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Investopedia: The Third Quarter Was Good To Lowe's

One quarter ago, I said I favored Lowe's (NYSE: LOW) over Home Depot (NYSE: HD), as I thought the difference in valuation outweighed the difference in quality between the two companies. So far, so good with that call, as Lowe's basically doubled Home Depot's return for the past three months. While I do worry that both stocks are a little expensive on the basis of investor optimism for a housing recovery, I won't rule out the idea that an improved business plan coupled with improving sales trends will be a powerful boost to earnings and cash flow for Lowe's over the next few years.

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Investopedia: For Home Depot At Least, The Recovery Looks Real Enough

I'll start this article by openly acknowledging that there seems to be things about Home Depot (NYSE:HD) as a stock that just seem to escape my grasp. While I have ample respect for the quality of the business and the management team, as well as the prospects for a housing recovery to reignite free cash flow growth, the Street always seems to be willing to pay more for Home Depot than I would imagine. So although I personally won't pay a double-digit EV/EBITDA multiple to buy a mature retailer, I'm not going to suggest that Home Depot's momentum ride is over yet.

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Investopedia: Home Depot Chooses Profits Over Empire Building

Although not everything that home improvement superstore operator Home Depot (NYSE:HD) has tried worked, management deserves credit for being ready with a quick hook when it seems clear that an idea just isn't going to live up to expectations. That seems to be the case with the company's plans for China, as management has announced that it will be closing its remaining big box stores in China and shifting to a strategy of specialty stores and e-commerce.

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Investopedia: Buy Lowe's For Tomorrow, Not Today

Investors have a very clear choice in the home improvement/big-box home retailer sector. Home Depot (NYSE:HD) is posting solid growth, gaining share and raising guidance, while rival Lowe's (NYSE:LOW) is struggling amidst a meaningful change in its merchandising and inventory management. While Home Depot is definitely hard to beat for near-term momentum, investors with more of a value inclination ought to take a closer look into what's going on at Lowe's.

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Investopedia: Home Depot Continues To Ride A Stop-Start Recovery

Investors seem to be pretty committed to the idea that a real recovery is underway in America's housing market. While earnings reports from companies like Armstrong World Industries (NYSE:AWI), Mohawk (NYSE:MHK), Masco (NYSE:MAS) and Stanley Black & Decker (NYSE:SWK) did not support an unequivocal bull argument, the stocks recovered pretty quickly.

What's more, leading home improvement retailer Home Depot (NYSE:HD) continues to report rebounding sales in a wide range of housing-related product categories. Although Home Depot shares seem ahead of themselves on valuation alone, momentum will likely stay with the stock until the beat-and-raise pattern is broken.

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Investopedia: hhgregg's Struggles Suggest Best Buy Could Be In Big Trouble

For all of the debate and discussion about what ails Best Buy (NYSE:BBY) and whether this large electronics and appliance retailer has a future, it's worth observing that times are just as bad (if not worse) at hhgregg (NYSE:HGG). While investors shouldn't draw straight lines between the two companies (hhgregg is much more focused on appliances and TVs), the fact remains that consumers are holding back on big-ticket spending and this does not bode well for the retailers.

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Investopedia: American Woodmark Making The Best Of The Worst

When you sell products into the housing market and the housing market is going through its worst stretch in living memory, the rest of the story goes pretty much the way you would expect. From peak to trough, cabinet and vanity maker American Woodmark (Nasdaq:AMWD) saw sales drop more than 50% and free cash flow plunge into the red.

That said, American Woodmark hasn't really done any worse than rivals like Masco (NYSE:MAS) or Fortune Brands Home & Security (Nasdaq:FBHS) in terms of market share, and has only had one year of negative free cash flow. With a clean balance sheet and major placement in both Home Depot (NYSE:HD) and Lowe's (NYSE:LOW), this may be a "when, not if" recovery story that could pay off for patient investors.

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Investopedia: Quanex Is Going To Take Some Time

There's still not that much joy to be found in the residential building world. While the superstores Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) have seen improvement in same-store sales and companies like Louisiana-Pacific (NYSE:LPX) are well off the lows, the actual building starts numbers still aren't good. That means investors considering the shares of Quanex Building Products (NYSE:NX) need to have some patience. While this company has built impressive share in markets like window and door components, demand still just isn't that strong. Quanex does seem undervalued on the basis of its potential long-run free cash flow, but with so much of that growth coming in the foggy future the risk here is above average.

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Investopedia: Now It's Lowe's Turn To Play Catch Up

It turns out that there wasn't room for two big-box retailers in book retailing or electronics, but that may not be the case in hardware and home improvement retailing. Neither Home Depot (NYSE:HD) nor Lowe's (NYSE:LOW) are showing the same sort of troubles as Barnes & Noble (NYSE:BKS) or Best Buy (NYSE:BBY), perhaps because so many of the goods they sell make little sense as online orders.

While there may be room for two, it seems like Home Depot and Lowe's are fated to play a lifelong game of leapfrog. Home Depot has solved many of the problems that drove away customers and is now trying to drive better savings through logistics. On the flip side, Lowe's looks like it's in the middle of a problem-solving store reset program, and its performance is lagging.

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Investopedia: The Window For Sears Holdings Seems To Be Closing Fast

There's no such thing as an essential retailer. Ask anybody younger than 35 about Montgomery Ward or Service Merchandise and you're likely to get a blank look; the same will be true of names like Mervyn's and Circuit City before too much longer. Although Eddie Lampert's team is working hard to fix what ails Sears Holdings (Nasdaq:SHLD), it is increasingly looking like an uphill battle for a company that is being out-done on multiple retailing fronts.

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