Whirlpool Corporation (WHR), Stanley Black & Decker, Inc. (SWK) & Williams-Sonoma, Inc. (WSM): Why My $600 Mistake Could Make You A Fortune

It sure looks that way: Lumber Liquidators Holdings Inc (NYSE:LL) is up more than 160% in a year, and the slowest growth in the sector was still over 30%. In my opinion, investing in this sector provides a prudent and lucrative way to tap into the recovery in the housing market. Here are a few of my favorites:

Whirlpool Corporation (NYSE:WHR) recently raised its full-year earnings forecast for this year. A great “made in America” buy, Whirlpool Corporation (NYSE:WHR) is also seeing a sales rebound in Europe. If Whirlpool Corporation (NYSE:WHR) can get operating margins above 6% — where they were a decade ago — WHR could approach $200 by next summer.

Stanley Black & Decker, Inc. (NYSE:SWK) announces its earnings expectations on July 26, and I would wait until after that to buy as I expect SWK will dip on slightly contracted revenues and earnings per share. However, this stock could be a really stable investment. It yields a 2.5% dividend, which has grown by about 6% annually over the past decade.

Williams-Sonoma, Inc. (NYSE:WSM) has been hitting 52-week highs this month, but I think it’s got room to grow because it has been expanding its margins and moving ahead with expansion plans. Williams-Sonoma, Inc. (NYSE:WSM) also continues to increase its direct-to-consumer revenues as a percentage of its total revenue.

Risks to Consider: The housing sector is cyclical: HIRI forecasts spending will level out in 2015 and 2016. Therefore, home improvement companies are not set-it-and-forget it stocks for the most part, and you will want to revisit your portfolio in a year to gauge whether to take your profits and pull out before the sector turns.

Action to Take –> While the entire sector shows upside, my favorites are Whirlpool Corporation (NYSE:WHR), Williams-Sonoma, Inc. (NYSE:WSM) and Stanley Black & Decker, Inc. (NYSE:SWK) because they have significantly lower price-to-earnings ratios than their peers — which tells me they’re still undervalued — and offer a high dividend yield. Dividend yields are attractive not only because they put additional money in the investor’s pocket — they also indicate a high level of fiscal responsibility.

In the interest of full disclosure, I ended up buying an Amana fridge from The Home Depot, Inc. (NYSE:HD) because they had the best price, plus free home delivery and takeaway of the old unit. I paid extra for a warranty in case I get it in my mind to do any more cleaning.

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This article was originally written by Bristol Voss and posted on StreetAuthority.