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"Hope you got your things together.. Looks like we're in for nasty weather..There's trouble on the way." Creedence Clearwater Revival got that right. East Coast Frankenstorm aside, the National Weather Service and The Old Farmer's Almanac are predicting a much colder winter this year and to make money (to pay those higher than normal utility bills) let's round up the usual suspects, The Home Depot (NYSE: HD), Lowe's Companies (NYSE: LOW), and Generac Holdings (NYSE: GNRC).
Yes, Home Depot is the place to go when you are battening down the hatches, buying flashlights, batteries, generators, whatever you need to prepare for and then repair after the storm. The stock has been on a tear for years but if its stock price was based on actual customer satisfaction it would be lower than Lowe's. However, Home Depot has more stores, with 2,249 retail stores in the US, Canada, Guam, Puerto Rico, US Virgin Islands, and Mexico, has more employees, and has economies of scale. That doesn't mean it's a better place to shop only that you may not have a choice as to which you'll patronize. I would say the problem at Home Depot is that it's difficult to find anyone to help you when you need it and that past experiences with both have generally been better at Lowe's. JMHO.
That said, with a 21.68 P/E and a 1.90% yield with a 40% payout ratio it seems upside is limited having already run 67.44% in 52 weeks, already outpacing its average price target of $60 and Oppenheimer just downgraded it on October 12 from outperform to perform.
The two home improvement retailers are practically neck and neck on P/E and yield, with Lowe's P/E at 21.05 and a 2% yield. It has only 1,748 stores in the US, Canada, and Mexico. Lowe's, too is up 48.76% over 52 weeks. The reurn on assets and return on equity percentages at Lowe's (6.69 and 11.53 respectively) are almost half those of Home Depot's at 10.72 and 23.84, (again respectively). Purely looking at the two stocks' institutional and insider support Lowe's biggest is Wellington Management Company with 85,920,495 shares woth over $2 billion and CEO Robert A. Niblock has 725,221 shares. Home Depot has them beat with institutions, with Capital World Investors holding 174,321,230 sahres worth over $9 billion dollars and 299 more institutions holding Home Depot. Home Depot reports November 13 and Lowe's on November 19.
Generac Holdings is a much smaller market cap company that basically makes residential and commercial generators but has a 5.44 P/E. It's not a much discussed stock but has quietly powered from a 52 week low of $18.35 to $30.61. You just missed a special dividend over the summer but with good numbers like these more may be in their future. On October 1 CEO Aaron Jagdfeld said of their push to increase sales of residential generators, their Powering Ahead initiative, that "..we have consistently exceeded our own performance goals associated with Powering Ahead and in fact reached many of those targets a year earlier than we had originally planned." The company raised guidance for the full year. This advance peek at the October 31 Q3 earnings release pre-market is interesting as they also said they believe the market opportunity for penetration is significant with only 2.5% of residential households with a backup generator and they now hold 70% of the current share of this market.
They are paying down debt, moving into Latin America, and net sales growth is supposed to continue at its mid-30's percentage range. These are all things that hearten investors and with this pre-announcement the actual numbers should be good. They have strong insider ownership of 62% of the shares outstanding. COO Dawn Tabat owns 1,105,483 shares herself. Generac is my favorite name of these three and is the name to buy before bad weather is predicted and to hold onto tightly through the storms a coming.
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