Jay Powell doesn't get enough credit for what he's doing in this country. He recognizes that lower rates will stimulate housing and holy cow is he ever doing so. We got single family starts that were up 17% year over year to 1.186 million but more important we are running out of inventory. Because of low rates we need 1.5 million homes to meet demand, according to the National Association of Realtors, or NAR. That's truly good news as housing punches above its weight, which at this level looks like only 10% of the economy but is really much more.
And then there are the roads, try Vulcan (VMC) and Martin Marietta Materials (MLM) . Construction means Stanley Black & Decker (SWK) , which keeps beating numbers, raising numbers. Deere's (DE) lawn products, terrific. I like Scott's Miracle-Gro (SMG) as a play on housing as well as the eponymous Pool Corp. (POOL) . The latter is a double winner, because it also figures into the play at home Covid-19 thesis. While it's stock is already up 35%, I think there's room for more because of that 1.5 million demand story that NAR is propounding.
Let's not forget that Waste Management (WM) does incredibly well when there is construction trash. It's their best line of business. The stock's down almost 20 points from its high and, as we told club members of Action Alerts PLUS this may be one of the most reasonable growth companies out there.
But let's talk about the big winners. First is Best Buy (BBY) because we are in an era where you need a television that's big enough to make your den into a theatre. We aren't going to the movies any time soon because of Covid. So we go to Best Buy and get the equipment we need to make our home into a theatre. But then we have my two favorites: Home Depot (HD) and Lowe's (LOW) . Home Depot's been the leader and it is still a fantastic stock even up here. But my favorite is now Lowe's because of the changes that Marvin Ellison is putting through. For years before Ellison came in Lowe's the company underspent on technology. That's no longer the case and I think that the company's on-line business will be the big earnings kicker. Lowe's used to be the leader in the group during the period where Home Depot underspent. The order may be changing.
The most obvious should not be dismissed: Lennar (LEN) , Horton (DHI) , Toll (TOL) , but I would prefer the components more than the builders if only because they are more consistent because they also serve the existing home buyer.
Right now you hear a ton of stories about how low rates hurt the banks and, indeed, low rates kept Bank of America (BAC) and JP Morgan (JPM) , and lots of other banks from making a lot of money on your deposits. That's a silly worry. When we add up all the people who are involved in the making and selling a house, lower rates have the biggest multiplier impact of any industry in the country.