For the past few months, I've been tracking stocks from various sectors that have been benefiting from better news about housing. Amid that improved macro data, one of my winning holdings has been flooring retailer Lumber Liquidators (LL), whose shares zoomed 29% on earnings in the week ended July 27. The stock has been edging higher since then, getting support along short-term moving averages.
But it's far from the only stock that may be benefiting from some renewed optimism about housing. For instance, there's Trex (TREX), which you could say has one foot in the flooring business. The company makes wood-alternative materials for decks, railings and fences -- and, like Lumber Liquidators, advertises frequently on cable television.
Trex shares have been consolidating in a somewhat sloppy fashion beneath their May high of $33.89. The stock has been trending along its five-day exponential moving average since last week. It's now a bit extended to offer a buy point, but the next pullback could be a good entry opportunity, as long as the general market remains in rally mode.
After reporting a loss of $0.24 a share last year, Trex is seen earning $1.58 a share this year. The company is expected to grow earnings to $2.20 per share in 2013, which would represent a gain of 39%.
There appears to be good price growth potential here, but the stock is thinly traded, moving about 180,000 shares per day. As is often the case in thin stocks, Trex has a high beta, 1.33. That means traders and investors need to take care and put stop losses and trailing stops in place, and thus avoid turning a paper gain into a serious loss.
Another company with some residential construction exposure is Beacon Roofing Supply (BECN), which had its initial public offering fairly recently. Shares rallied to an all-time high Friday, but pulled back to end the session with a loss of $0.04 at $26.14. The Massachusetts-based retailer, whose name is fairly self-explanatory, went public in 2005 at $13.50. The stock split in May 2006, so the split-adjusted IPO price was $8.67.
Beacon is a relatively unknown company, but it's been a winner for investors, despite having a high beta and a volatile trading history. Beacon recently acquired materials distributors Cassady Pierce and Structural Materials, which helped boost results in the most recent quarter.
Finally another stock that rallied to a new high Friday is Fortune Brands & Home Security (FBHS), which was spun off in 2011 from the old Fortune Brands (whose other products included golf gear and Jim Beam whiskey). The current iteration of FBHS sells faucets and other kitchen and bath accessories, cabinets, windows and home security systems.
Despite some erratic revenue and earnings results, the stock is up 50% year to date. This is a mid-cap name, with a market value of $4 billion. The stock sees trading volume of 1.2 million shares per day.
The earnings outlook calls for strong double-digit percent gains this year and next. That can bode well for the stock's future price performance.
As of now, the stock is extended from any technical buy point, but a moving-average pullback or a series of tight weekly closes could present a new entry opportunity.