We all spend quite a bit of time at home, particularly on weekends, for those of us with 9 to 5 full-time jobs. We all love the comforts of home more than most any other place. As they say, "there's no place like home." But for some homeowners, a house has been more of a burden over the last few years, as they have not been able to sell it without incurring a huge loss, nor invest in it for fear of where their next paychecks were coming from.
Now, with the real estate market stabilizing, we may see some positive movement in stocks related to housing. And if you go by Warren Buffet's philosophy not to invest in anything you don't know or understand, then you should only invest in the stocks of companies you know, or even better, the stocks of companies whose products you use. I think the following three choices may fit the bill, as they offer some of the creature comforts of home you know and love.
Select Comfort (SCSS)
Select Comfort manufactures and retails air beds and other sleep-related products such as foundations, frames, and pillows. The company's mattresses have adjustable firmness levels and range in price up to $2,600. The company sells its products through 400 Select Comfort stores across the United States, as well as through leased departments (such as in Bed Bath & Beyond stores) and direct marketing operations.
While Tempur-Pedic, Sealy, and Mattress Firm have been reporting horrible results, Select Comfort not only beat estimates but increased guidance for the full year. Its strategy to set up its own stores and to target both baby-boomers and young professionals is working. Haven't heard of it? If you watch TV, you may have seen its Sleep Number bed commercials. The marketing campaign has been an integral part of Select Comfort's strategy to build brand awareness. The company has no debt and even though it may look pricey, it has some upside.
|Industry||Home Furnishings and Fixtures|
|Return on Invested Capital (ROIC)||55.66%|
|Free Cash Flow/Sales||7.49%|
Ethan Allen (ETH)
Ethan Allen Interiors is a leading manufacturer and retailer of home-related products such as wood furniture, upholstered goods, and other accessories. The firm also offers full-service interior design solutions through nearly 290 retail design centers. Ethan Allen operates nearly 145 design centers, while independent retailers operate 140 licensed locations. Of the centers, roughly 75% are in the U.S., with the remainder spread across Canada, Asia, and the Middle East.
The real estate market looks to be stabilizing, and today there were reports that some cities have seen a double digit increase in listing prices. There may still be a "shadow" inventory out there that may keep prices down for some time, but as house purchases begin to rise, homeowners will look to furnish them.
|Industry||Home Furnishings & Fixtures|
|Return on Invested Capital||10.52%|
|Free Cash Flow/Sales||3.77%|
National Presto Industries (NPK)
National Presto Industries, together with its subsidiaries, sells small kitchen appliances, absorbent products, and housewares. Notable products include pressure cookers, FryDaddy deep fryers, SaladShooter food slicers, and the Pizzazz pizza maker. The firm also makes indoor grills, electric knives, coffeemakers, popcorn poppers, can openers, griddles, and electric frying pans. Presto markets its products directly to retailers and through distributors throughout the United States.
This one could be a bit tricky, and I recommend watching for the slightest bit of good news before jumping in. The stock is down 25% YTD, but looks to have stabilized since May 2012 and has been range-bound. If it breaks above the 100-day moving average on strong volume, could be worth sticking a toe in the water with a small position.
|Industry||Home Furnishings & Fixtures|
|Return on Invested Capital||15.21%|
|Free Cash Flow/Sales||7.68%|
Just imagine, you can be home with the family cooking pizza and popcorn and all sorts of other goodies, lounging in your professionally decorated family room with plush furniture. After watching a little TV, you climb upstairs and slide into your customized (Sleep Number) bed. Ahhhhhhhh.
Disclosure: I am long SCSS.