The market�s rally since its mid-November lows has proven durable enough to turn our intermediate-term indicators back into a bullish mode. �
Three of our new recommendations are all poised to see stronger demand as a result of Hurricane Sandy: building products supplier Louisiana-Pacific (LPX), home improvement retailer Lowe's Companies (LOW) and MasTec (MTZ), an off-the-radar name in the construction business.
Lowe�s had some trouble grabbing hold of the industry�s turnaround, but after tinkering with some pricing (it�s gone back to low prices across the board) and slashing its own costs, it�s beginning to benefit.�
Earnings in the latest quarter were up 11%, and more important, were well above estimates, with the company�s top brass offering encouraging words about the future. (Indeed, analysts see the bottom line jumping 21% in 2013.)�
It also isn�t hurting that Hurricane Sandy�s devastation should lead to a flood of reconstruction orders; Home Depot indicated as much a couple of weeks ago, and Lowe�s should catch a tailwind from that, too. All told, there�s nothing revolutionary here, and we don�t think this stock is going to triple.�
But with a reasonable valuation, a solid dividend (1.8% yield), a still-powerful housing market and a management team that�s finally pulling the right levers, the stock�s path of least resistance is clearly up.
A bad earnings report caused the stock to lag through mid-August. Since then, though, LOW has been acting well. It�s not a fast-moving stock, so we advise trying to buy on a dip toward the top of the earnings gap, around $34.
If you�re looking for a way to take advantage of the improving housing market, but are queasy about investing directly in homebuilders, Louisiana-Pacific may be the foundation for you.�
Louisiana-Pacific produces board, siding, wood products and� insulation used in new home and manufactured housing construction and for repair and remodeling, so you can see why the budding recovery in the housing market has been a boon for Louisiana-Pacific.
The ongoing Hurricane Sandy recovery efforts should remain a driver for Louisiana-Pacific, as rebuilding and reroofing remain top priorities for many in the Northeast.
The stock was a bit over-extended last month and has since pulled back to support at the $16 level and their rising 25-day moving average.
From a long-term perspective, LPX has still soared more than 170% since setting a bottom in October 2011, with the stock largely ignoring the past year�s economic woes. LPX�s recent dip should be seen as a potential buying point amid a longer-term uptrend.
MasTec is a mid-sized infrastructure construction company that engineers and builds energy, communication and utility projects in North America. The company has been around since 1929, and has a great history of steady growth.
Its two most-recent earnings reports (early August and November) were very strong and beat analysts� expectations handily. Meanwhile, SuperStorm Sandy has created a huge opening for companies like MasTec that specialize in building (and rebuilding) all forms of infrastructure.
The combination of a couple of surprisingly strong quarters and the promise that Sandy will present additional opportunities makes MasTec a tempting opportunity. We think you can buy some here with a stop near $21.5; a push above $25 would be bulish.
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- Breakout at Home Depot
- Caterpillar: Rebuilding buy
- Shaw Group: Engineering profits
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