The Housing Recovery Continues: 3 Top Stocks To Buy On Dips

Includes: HD, SHW, WFC
by: Seeking Benny Frank

It is hard to believe, but slowly the housing market in the US is coming back. Homebuilder Toll Brothers (NYSE:TOL) just reported a strong quarter, saying "Housing recovery starting to roll." Years of pent up demand, low interest rates, and falling national unemployment will be a force in the market for the next half decade. Also of note, sales of distressed homes have skyrocketed in recent years, leading to a nationwide tsunami of home improvement; consuming mountains of tile, carpet, 2x4's, and paint.

Top housing recovery stocks to buy on dips:

Wells Fargo & Company (NYSE:WFC)

Wells Fargo is the fourth largest bank in the US by assets, second in deposits, and the leading originator of home mortgages for the last 3 years. Headquartered in San Francisco California, WFC has a fortress balance sheet with no trading mess in London, a major long-term holder in Warren Buffett, and pays investors a sizable and growing 2.83% dividend. Wells Fargo reported a decent Q1, profits topped estimates but could have been better. Honestly earnings growth is the real story here, the shares look to earn $3.27 for 2012, and $3.70 for the 2013 campaign; leaving the shares trading at 8.4x '13 earnings. Wells Fargo is superbly run, has a strong growth profile, and looks to take share from its stumbling rivals.

WFC SEC filings.

Home Depot, Inc. (NYSE:HD)

Home Depot is the leading home improvement superstore in the US, and as of late has been stealing valuable market share from arch-rival Lowes (NYSE:LOW). No national retail chain is better run than HD; earnings have been strong, and earnings growth looks to be almost 20% a year for the next 5 years. As the housing market continues to improve millions of homes will be repaired, re-floored, and updated. Other good news, (NASDAQ:AMZN) won't be selling 2x4's anytime soon, and Home Depot is on its game; reporting a strong Q1 earlier in the year. HD provides customers a valuable variety of products, a dividend of 2.42%, and is up 29.8% over the last 12 months; not bad.

HD SEC filings.

Sherwin-Williams Company (NYSE:SHW)

Sherwin Williams is a premier paint and coatings producer, making the company a great pure play on the coming multi-year housing recovery. Their Sherwin Williams Paints line is one of the top selling paints in North America, South America, and Europe. SHW had a great Q1, and shares currently trade at $119.80, 26x earnings. Coming earnings growth for SHW will be rapid, and with a market cap of only 12B there is a lot of room for growth going forward. The shares look to earn $6.18 in 2012, and a conservative $7.31 for 2013, leaving the company trading at 16.4x '13 earnings. SHW is my top pick of the three, but I'd like the stock to come down a little before adding to my position. The shares currently yield 1.3% and are trading higher by +1.2% on a day the S&P500 is off 12pts.

SWH SEC filings.


As always Europe is driving the bus (markets). If Greece implodes, or Germany decides enough is enough, global markets will sell off, and go down hard. I look to buy that dip, and I recommend you do too.


With strong earnings growth, and a housing super-trend on their side, WFC, HD, and SHW look well positioned to grow for years to come. The above companies are superbly run, high-quality, and best in class; a housing recovery will look favorably upon their share holders.

Always do your homework.

Disclosure: I am long SHW.