I know what you may be thinking: “Stock market plumbing stocks”? Really? He must be scraping the bottom of the barrel for ideas. But, when it comes to investing, it can pay to think outside the box. If you can identify trends that other investors aren’t aware of then you’ll be able to get in on stock trades earlier than others and *potentially* come out ahead. 

Right now, stock market plumbing stocks could be that rare opportunity that other investors aren’t talking about. Hear me out real quick…

The Bull Case For Plumbing

Aging Baby Boomers = More Home Maintenance

One economic megatrend that could spur investment in plumbing stocks is the aging Baby Boomer population. At 73 million people, Baby Boomers make up the second-largest generation behind Millennials. Over the next two decades, this generation will slowly start to retire – a trend known as the “Silver Tsunami.” Traditionally, an aging couple would downsize into a smaller home. But, it doesn’t look like many Boomers are doing this.

Many Baby Boomers locked in record-low mortgages during the pandemic when interest rates were at nearly 0%. Right now, many Baby Boomers are refusing to sell their home and downgrade to a smaller living space. After all, why would they? If you’re locked into a 2 or 3% mortgage then it makes no sense to move and take on a mortgage closer to 6% or 7%. Baby Boomers aren’t the only ones contributing to this trend. But, they’re playing a big role.

So, with this in mind, we can expect many Baby Boomers to age in place over the coming years. This inevitably means they’ll need to upgrade their existing homes, which could lead to a surge in demand for plumbing (along with home repair services in general). 

But, this isn’t the only trend that could cause demand for plumbing services to skyrocket.

Commercial-to-Residential Conversions = High Plumbing Demand

Another tailwind for stock market plumbing stocks is in the commercial real estate market. Specifically, the fact that many office buildings could be converted into housing over the coming years.

Ever since the pandemic, remote work has surged in popularity. This has had a chain reaction for the commercial real estate market.

  1. The value of office space has tanked: With so few people working in person, office space values have dropped. The exact percentage drop depends on the market. But, CoStar estimates that office values have dropped 15% in the past two years. I personally feel that office values are dropping much more rapidly. But, lower prices have not been realized yet because so few people are buying/selling office buildings. 
  2. Developers are looking to repurpose office space: Instead of sitting on assets that are losing value, many owners of office space are converting them into something more useful: apartments. Some cities, like Boston, have already announced hefty tax incentives to get the wheels moving on these conversions.

So, the problem is that office buildings are losing value rapidly. The solution is to turn these now-useless assets into something valuable: affordable housing. By doing this, developers could kill two birds with one stone. But, there’s just one problem: It’s hard to convert office space to apartments. 

This conversion process requires tons of maintenance including installing dozens of new bathrooms. After all, an office normally only has one or two bathrooms per floor (depending on the size of the office). But, if you are converting one office space into 20 apartments then you’ll need 20 different toilets, showers, and sinks. Now, multiply this by all of the office buildings across the country in the process of converting office space. Now you know why I’m bullish on the plumbing sector.

With all that said, let’s explore some of the top stock market plumbing stocks that could benefit from these megatrends.

Ferguson PLC (NYSE: FERG)

Ferguson PLC is a British plumbing and heating products distributor that primarily operates in North America. This company specializes in infrastructure, plumbing, and HVAC. It has been making big moves in the plumbing industry as the company recently acquired two other plumbing companies:

  1. Yorkwest Plumbing Supply Company: A leading distributor of plumbing, municipal, hydronics, institutional, HVAC, and industrial products in the greater Toronto area
  2. Grove Supply Inc: A NJ-based plumbing and HVAC distributor that serves the residential trade, builder, and remodel markets.

Ferguson’s stock is up 13% so far through the year. The company also reported 2023 annual revenue of $29.7 billion (+4% annually) and $1.89 billion in net income (-11% annually). Keep an eye on Ferguson PLC to be one of the top stock market plumbing stocks in the coming years.

Emcor Group (NYSE: EME)

Emcor Group is an American mechanical and electrical construction, industrial, and building services company. It’s not as much of a pure-play plumbing stock as Ferguson is. But, this all-in-one construction company could still benefit from the two trends that I highlighted in the beginning.

So far through the year, Emcor’s stock has risen roughly 80%. The company also reported 2023 annual revenue of $12.6 billion (+13% annually) and $633 million in net income (+56% annually).

Comfort Systems USA (NYSE: FIX)

Comfort Systems is a leading building and service provider for mechanical, electrical and plumbing systems. The company is composed of 43 operating companies who operate in 173 locations across the US. This diversification is crucial as it will help Comfort Systems take advantage of the above trends on a nationwide scale.

Comfort System’s stock is up nearly 60% so far through the year. The company also reported 2023 annual revenue of $5.2 billion (+26% annually) and $323 million in net income (+31% annually).

Home Depot (NYSE: HD)

Although not specifically a plumbing stock, Home Depot could also benefit from the trends listed above. Home Depot is the go-to store for most DIY homeowners. But, this massive construction supply company has been trying harder to attract “pro” customers in recent years. This includes contractors or small businesses who need supplies for paid projects.

According to Yahoo Finance, the “pro” consumer makes up roughly 50% of Home Depot’s customer base, compared to 25% for Lowe’s (NYSE: LOW). In all honesty, Lowe’s and Home Depot are incredibly similar companies. But, the fact that Home Depot attracts more pro customers gives it a leg up over Lowe’s. 

Home Depot’s stock is up 1% so far through the year. The company also reported 2024 annual revenue of $153 billion (-3% annually) and $15.1 billion in net income (-11% annually).

It’s also a great stock to add to your dividend portfolio with it’s 2.69% yield.

I hope that you’ve found this article valuable when it comes to discovering the top stock market plumbing stocks to buy. If you’re interested in learning more then please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor.