The increase in home turnover and the home price appreciation, as well as the solid employment and wage growth, served as the main catalysts for growth in the U.S. home improvement industry throughout 2015. According to the Home Improvement Research Institute (HIRI), the home improvement product sales growth in 2016 is estimated to exceed the growth rate reached last year. The HIRI anticipates total home improvement product sales to grow 4.7% in 2016, with consumer market sales anticipated to increase 4.8% and the professional market sales estimated to climb 4.6%. Meanwhile, the sustained increase in U.S. home prices is expected to spur consumers’ willingness to invest in their homes, which implies the demand for home improvement product sales will most likely keep growing. According to fresh statistics, the value of the average U.S. home increased approximately 8% in the past year and 24% in the past five years. As the U.S. economy continues to grow, it may be a great idea for investors to turn their attention to the highly-concentrated U.S. home improvement industry. Thus, the following article will lay out a list of five home improvement retailers worth investors’ attention, which includes the two widely-known giants of the home improvement sector.
At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5 Beacon Roofing Supply Inc. (NASDAQ:BECN)
– Investors with Long Positions (as of December 31): 24
– Aggregate Value of Investors’ Holdings (as of December 31): $296.94 Million
There were 24 hedge funds from our database with stakes in Beacon Roofing Supply Inc. (NASDAQ:BECN) at the end of the December quarter, as compared to 22 funds a quarter earlier. Similarly, the overall value of those stakes grew to $296.94 million from $210.05 million quarter-on-quarter, with the 24 funds amassing 12.20% of the company’s outstanding common stock heading into 2016. Beacon Roofing Supply is the second-largest distributor of residential and non-residential roofing materials on the North American continent. In October 2015, the company completed the acquisition of roofing products distributor Roofing Supply Group in a cash-and-stock deal valued at roughly $1.2 billion. RSG was distributing roofing supplies and other related materials from 85 locations across 25 states prior to the merger completion, so the deal is set to strengthen Bacon’s position in the U.S. roofing materials industry. In early February, the company reported its financial results for the first quarter of fiscal 2016 that ended December 31, posting total sales of $976.5 million. The company’s first-quarter top-line figure increased by 63.8% year-on-year, mainly due to the aforementioned acquisition and other freshly-completed acquisitions. Even so, Beacon’s first-quarter organic growth in existing markets reached a rate of 11.8%. Shares of Bacon are up 29% in the past 12 months, but are down 2% year-to-date. Mariko Gordon’s Daruma Asset Management owns 1.63 million shares of Beacon Roofing Supply Inc. (NASDAQ:BECN) as of the end of the December quarter.