Some See Value In Housing-Related Industries [Housing Tracker]

Housing-Related Industries 

Deep Value in USG's Slump. “The housing slump and rising input costs have put the brakes on earnings for USG, the global king of gypsum wallboard. After posting $56 million in profits for Q2’07, USG lost $40M for Q2’08. The loss included $21M in charges relating to restructuring, including job cuts and the closure of distribution centers and manufacturing lines. [However,] through the restructuring, the company has achieved greater operating efficiencies by closing some older, higher-cost manufacturing lines. Despite weak demand, the company managed to raise product prices to absorb some cost increases. USG also announced a 65% increase in operating profit from the worldwide ceilings division, on sales of $237M.” (Motley Fool, July 23^rd)

Riding the Life Cycle.  “Jeff Coons, Co-director of Research, Manning & Napier Advisors: The home-improvement retailers Lowe's [LOW] and Home Depot [HD] are facing a big cyclical downturn, with a low return on investment. You have a lot of stress in the end market, with housing being front-page bad news for these companies. But these companies also have… generally been able to gain market share. More local home-improvement retailers are… under a lot more stress then they are. [They] are financially stronger than the others… Over the long term, [these companies] have returns on equities in the high teens or low 20s, and they are trading at 1.5 times to two times book value. That's a pretty good potential return.” (Barron’s, July 21^st)

West Coast Bancorp F2Q08 (Qtr End 6/30/08) Earnings Call Transcript. “Hadley S. Robbins, EVP, CCO: “The housing industry softens those related businesses that support the housing industry... And, it’s driven primarily first of all through revenue reductions and so a number of these businesses are having to allocate their resources very efficiently in order to offset the impact in revenue… First it hit the services: That would be architecture and civil engineers. [Then] it went through excavators, then the lumber products in our experience and it then moved on other areas… Particularly nurseries involved in shade trees and bare root stock that feed in to the subdivision construction aspects of the housing industry would feel this as well and so they’ve made all the adjustments. I hadn’t seen a deterioration that would be pronounced. I’ve seen a steady understanding of the environment changing and businesses adapting to that situation right now.” (Seeking Alpha, July 21^st)

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

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Comments

[Calvin C.]

Sure, if want your investments sit idly for the next 3-5 years.