The American Dream?
|Written by GSCR Staff|
|Tuesday, 03 March 2015 06:35|
We seriously debated having dubbed audio of Morgan Freeman’s voice to our Goldman Guide, ‘March of the Millennials’, yesterday, but there were too many copyright infringements to worry about.
We would have really grabbed your attention no doubt. One of the major themes of our article was that this Generation Y appears to be breaking from the past as far as traditional goals and ambitions are concerned.
On Sunday CBS’ “60 Minutes” ran a special on Lumber Liquidators (NYSE – LL) and possible dangerous levels of formaldehyde in the firm’s Chinese manufacturing plants. This is right up the millennials alley when it comes to concern over the environment. LL got hammered dropping 25% in yesterday.
Two stocks that could benefit greatly in the short term from this are Home Depot (NYSE – HD - $116.12) and Lowe’s Companies, Inc. (NYSE – LOW - $75.09) which have already enjoyed 40% and 48% run ups over the last year. Both companies are projected have growth in revenue this year to justify this increase. A quick trade could be in order here either with a straight up buy or using options, particularly if you already own one of these.
This brings us the larger question at hand. As per our article yesterday, many millennials are delaying the ‘American Dream’ of owning a home due to several factors, including the housing bubble of last decade. Interest rates that are still very low have not been a big enough carat. If we look at SPDR Homebuilders ETF (NYSE – XHB - $36.40) as a proxy, these factors may be starting to affect the long term potential of the industry. XHB is up a nice 7% over the last year, but the S&P is up 13%. The industry is definitely lagging.
Where are we going with this? While the shift in home buying may be a market reality for millennials it could be either a delay or a transition to permanent rentals. In most major cities home building has picked up, but it is in apartment housing. There is still opportunity to make money here for sure. Picking the right stock is important.
We featured PGT, Inc. (NASDAQ – PGTI - $11.03) in May 2013 at an $8.87 price level. The beauty of this stock and Company is that they offer windows and doors that are specifically designed for high impact, high wind environments. So it does not matter if houses or apartments are the final destination for the products. The stock still looks great from a valuation perspective with a forward P/E of 13 versus the trailing 33 P/E. PGTI is a solid long term small cap play on housing and should get to $12 by the start of 4Q15.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com
Leave your comments