As we look back on some of the businesses that have benefitted from pandemic-related tailwinds over the past year, home improvement companies are certainly at the top of the list. These businesses saw surges in demand for their products and services as people were stuck at home and practiced social distancing, which resulted in money flowing into their stocks. Now that we are eclipsing a year since the pandemic began, investors are starting to wonder whether or not these stocks can sustain their current price levels after last year’s strong performance.
While it’s true that home improvement stocks received a short-term boost from the pandemic, there are several reasons why they are still worth a look for long-term investors at this time. The work-from-home trend is here to stay, the real estate market is expanding, and many of these companies have invested heavily in online ordering and delivery services that can drive growth. You also have another potential round of stimulus coming that could result in more spending on home improvement. That’s why we’ve put together a list of 3 home improvement stocks that can upgrade your portfolio so that you can take advantage of continued growth in the industry.
Overstock.com
First up is Overstock.com (NASDAQ:OSTK), a company that sells a broad range of new home products at low prices on its e-commerce website. Homeowners can find things like décor, bedding, furniture, and home improvement products on Overstock, which is promising given the fact that many people could have some extra money to spend in the coming weeks if an additional stimulus bill is passed. Overstock made a massive comeback in 2020 and saw a 205% year-over-year increase in new retail customers in Q2. The company also reported total net revenue of $732 million, a year-over-year increase of 111%.
The stock hit a high of $128.50 back in August but sold off substantially since then. It has been consolidating for several months and appears to be breaking higher in 2021. Overstock is up over 11% year-to-date and should continue to benefit from increasing digital spending, which Salesforce.com (NYSE:CRM) recently reported is up over 50% year-over-year. Overstock is also interesting as it offers investors exposure to cryptocurrency with its Medici Ventures and tZERO businesses, making it an even more attractive option for investors that want to be involved in the home improvement market.
Sherwin-Williams
Another home improvement company that stands to benefit from a strong housing market is Sherwin-Williams (NYSE:SHW), which is the largest U.S. producer of paint, coatings, and related products. The company reported very strong Q3 earnings results including an adjusted net profit of $764 million and consolidated net sales up 5% year-over-year. These results were very impressive given the impacts of COVID-19 and confirmed that it is one of the best home improvement stocks to own for the long-term. After Q3, Sherwin-Williams upped its full-year guidance, which tells us that the company’s management is confident in its ability to execute at a high level going forward.
What’s also nice about Sherwin-Williams stock is that the company has increased its dividend for 41 consecutive years, which is a testament to just how well-run and financially solid the company is. While the dividend yield of 0.73% is nothing to write home about, investors should be interested in the potential for record sales as housing rebounds over the next few years. Sherwin-Williams will report its Q4 earnings this Thursday, so make sure to review those results before adding shares.
Builders FirstSource
This company is a supplier and manufacturer of building materials, manufactured components, and construction services to professional contractors, sub-contractors, remodelers, and consumers. It’s a stock that is worth a look since Builders FirstSource (NASDAQ:BLDR) should benefit from favorable housing market trends and a large shift in people moving from urban areas to suburban living. Back in October, the company reported a 15.9% year-over-year increase in net sales along with an Adjusted EBITDA increase of 15% year-over-year to $184 million. These numbers should be even better if lumber costs decrease and home buying increases in 2021.
Back in August of 2020, the company announced a merger with BMC Stock (NASDAQ:BMCH) in an all-stock transaction to create the nation’s premier supplier of building materials and services. These types of strategic moves can reward long-term shareholders. Acquisitions completed during the prior four quarters contributed to net sales growth of 2.0% in Q3 for the company. Builders FirstSource stock is up 5.2% year-to-date and the company will announce its Q4 earnings on Feb. 26, so keep an eye out for a pre-earnings rally.