On consumer spending and the economy

Lowe’s CEO Robert Niblock attributed their recent earnings results to strong consumer spending. Here is what he said on the call:

“Our most recent consumer sentiment survey revealed that favorable views around personal finances and home improvement spending are holding steady, Rising home prices are motivating homeowners to invest in their homes and many believe this trend will continue as the survey revealed a significant increase in future home value expectations. Likewise, we continue to see home improvement spending outpace overall spending as well as positive home improvement project intentions.”

Looking out to the balance of the year, he said he expected the strong consumer spending to continue:

“Turning to the economic landscape for the balance of the year, the outlook for the home improvement industry remains positive. Persistent gains in the job market as well as disposable income growth is expected to outpace growth in the economy and should contribute to solid growth in consumer spending,”

People are not just buying new homes, they’re investing in their current ones. I believe housing just became the #1 priority in the consumer mindset. This should bode very well for LGIH.

Does anyone know what sort of materials companies are used by builders such as LGIH? This may yield a good list of stocks to investigate.

Also, looking at what sorts of improvements consumers are making - kitchens, baths, closets - and if you have a deck on your home you know eventually it has to be repaired or replaced. TREX is a company that comes to mind and could be seeing an uptick if the improvement bug is truly in the air. For kitchens, I think MIDD may be a good company to look at. They’ve historically sold to the commercial industry, but have recently picked up product lines for consumers. Come to think of it, MIDD already has a very strong avenue of growth through the proliferation of restaurants. People are eating out a lot more.

Just some ideas here. Hope there are others.



I stick with Home Depot for the home stuff. Not sexy but it works for me.

long HD

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Maybe drywall supplier USG http://caps.fool.com/Ticker/USG.aspx
4 PE. It has been on quite a run lately though. I put t in CAPS in March and I have around 25 points.

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