The Daily Dose: Home Cooking

 | Jan 02, 2014 | 12:01 PM EST  | Comments
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Stock quotes in this article:

tol

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hd

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wmt

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tgt

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k

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gis

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cpb

Happy 2014 y'all!  I hope the past couple of days have been immensely pleasurable with family and friends.

While you were somewhere chilling and having a merry seasonal stint, by design I was home alone working my butt off. Talk about leading Millennial Nation by example. The fruits of my labor, you ask? I found two things deserving of your attention. Hey, let's face it sport. You have forgotten the portfolio exists (other than to use as a digital piggybank) seeing as stocks only have upside risk, according to the PDF document sent along by an investment strategist.

Homebuilders Have Surged

Homebuilder stocks were decimated in the middle stages of 2013 when former Fed Chairman (yes, former) Ben Bernanke made his infamous taper comments, sending yields north and new order rates south for builders. Rising financing costs, coupled with unrelenting price increases by profit-hungry builders, was an unfortunate concoction for builders stocks that were trading on lofty price-to-book ratios (key sector metric).

But see how Mr. Market has bid up homebuilders right into the seasonally strong spring selling season as if to say "orders WILL re-accelerate despite higher financing costs and continued price creep." Be careful buying into this logic, as it appears to have decoupled from the rockier fundamentals in the housing market, illustrated recently by a disappointing November pending home sales index.

In staying consistent with my firm's ratings, I think the most lucrative and less risky ways to invest in the U.S. housing market's continued recovery is through Toll Brothers (TOL) and Home Depot (HD).

Source: Yahoo! Finance

D-E-F-L-A-T-I-O-N

Prices to make the food you see canned and bagged in the aisles of Wal-Mart (WMT) and Target (TGT) have been on a deflationary trend for about a year.  For most food manufacturers such as Kellogg (K), General Mills (GIS) and Campbell's Soup (CPB), deflation has not yet shown in the COGs line. In fact, lingering inflation has been the ugly norm. That, in addition to a stepped-up pace of marketing to drive meager market-share gains and a market obsessed with beta instead of dividend growth, has kept food manufacturer stocks under wraps. I think beyond 1Q 2014 food companies will begin reporting improving gross margins and earnings stories to investors and with the stocks having been underperformers in 2013 relative to the Dow and S&P 500, today is when to start considering entering a longer-term position.

Source: Yahoo! Finance

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