As most people spent the majority of 2020 stuck at home, many realized that they wanted to spruce up their surroundings. If they were going to spend so much time at home, why not take some of that extra free time from not commuting and add some upgrades into their homes. This created a strong demand for a variety of products, such as lumber, furniture, carpet, and tools…
As the economy has continued to open up and return to normal, more people are headed back into their offices. However, the demand for home improvement hasn’t slowed down. Driven by low rates, fiscal stimulus, and a strong housing market, demand for home goods is still high. As we head into the summer, I believe there will be a further uptick in demand as the warmer months are a great time to do repairs and remodeling.
This demand should keep driving growth higher for home goods stores. So, to find home goods stocks with a great chance of moving higher in the upcoming months, I ran a screen for Buy or Strong Buy stocks in our proprietary POWR Ratings system. Here are three top home goods stocks to consider adding to your portfolio: Home Depot, Inc. (HD – Get Rating), Lowe’s Companies, Inc. (LOW – Get Rating), and Mohawk Industries, Inc. (MHK – Get Rating).
HD is the world’s largest home improvement specialty retailer, with about 2,300 warehouse-format stores offering more than 30,000 products in-store and 1 million products online. Products include building materials, home improvement products, lawn and garden products, plus services such as home improvement installation and tool and equipment rentals.
The company serves three types of customers, DIY, which are typically homeowners who prefer to purchase products and complete projects independently; DIFM, which are homeowners that still purchase products but hire third parties to complete work; and professional customers such as contractors, repairmen, and tradesmen.
HD reported solid numbers for the first quarter, where both sales and earnings improved year over year, driven by strong demand for home-improvement projects. The company has also benefited from its “One Home Depot” plan, which focuses on expanding its supply chain and enhancing its digital experience. Part of this included enhancing its delivery and fulfillment options, which makes ordering easier for customers.
While DIY projects are driving demand for its products, its Pro segment has been a critical growth driver for the company. The Pro segment is seeing robust sales growth, and management expects that to continue. HD has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Momentum Grade of A as its stock is up over 21% for the year.
HD also has a Quality Grade of B due to a strong balance sheet. The company had $6.6 billion in cash as of the end of the most recent quarter, compared to only $1.1 billion in short-term obligations. We also provide Growth, Value, Stability, and Sentiment Grades for HD, which you can find here. HD is the #29 ranked stock in the A-rated Home Improvement & Goods industry. You can find other top stocks in this industry by clicking here.
LOW is the second-largest home improvement retailer globally, operating about 1,970 stores throughout the United States and Canada. Its stores offer products and services ranging from home decorating and maintenance to repair and remodeling. LOW has strong pricing power as it’s positioned to continue to capitalize on rising demand in the home improvement market.
Its products not only appeal to Do-It-Yourselfers but to commercial customers as well. This explains why it has been investing in technology and merchandise categories for its Pro business. The company’s total home strategy, which includes…
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