Home Improvement Stocks for the Do-It-Yourselfers
They say that home improvement is a job that’s never truly done. This is especially true now that remote work has quickly become the norm, with this in mind, home improvement stocks are set to soar. People are spending more time at home than ever before. More time around the house means more time spent hanging those shutters, fixing the disposal, or repainting the bathroom. Most of us are constantly spending money on home improvement.
2021 has also been a great year for buying homes. By the time the year ends, Statista expects that 7.1 million homes will be sold. This is one of the highest years ever. Buying a home is also not a one-off purchase. It’s a little bit like buying a dog. Once you welcome the dog to your family, you’ll need to feed it every single day. On the same note, once you have moved into your home, you’ll constantly be spending money on general home maintenance.
With all this money pouring into home improvement, many investors are considering adding a few home improvement stocks to their portfolios.
With that said, let’s take a look at a few of the best home improvement stocks to buy.
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
Home Improvement Stocks to Buy
Home Depot (NYSE: HD)
The Home Depot is the nation’s largest home improvement retailer. It stocks just about any product that a needy homeowner could want. This means everything from tools, to construction products, to professional services. If you are looking for one of the top home improvement stocks then Home Depot is a great choice.
In FY 2021, Home Depot posted all-time-highs for annual revenue and income. It posted annual revenue of $132.11 billion. This was a 19.85% year-over-year increase from $110.23 billion. It also posted a net income of $12.87 billion. This was a 14.45% year-over-year (YOY) increase from $11.24 billion. On top of that, Home Depot announced a dividend of $1.65 per share.
What makes Home Depot so successful is its focus on improving the customer experience. In Q3 of this year, it experimented with the floor plans in its highest traffic stores. Management wanted to boost the store space productivity while also improving the customer experience. It ended up letting 400 stores experiment with different strategies. The results were well beyond management’s expectations. In general, sales per square foot improved and customers reported a better shopping experience.
Home Depot could also be a big beneficiary of President Biden’s Infrastructure Bill.
Biden Infrastructure Bill
President Biden recently passed his $1 trillion infrastructure bill. This money will go towards upgrading outdated roads, bridges, transit systems and more. Most of the money will initially go to major construction companies. However, Home Depot could potentially experience trickle-down effects. This is mainly because Home Depot is quickly becoming a store for professionals.
In Q3 of 2021, Hope Depot experienced rapid growth from its Pro customers. Compared to Q3 2020, large ticket purchases ($1,000+) increased by 18%. In the coming years, contractors will have lots of money to spend thanks to the infrastructure bill. It’s likely that plenty of this money will end up being spent at Home Depot.
Home Depot’s stock is up 56% so far in 2021. It’s also up 213% over the past 5 years, making it a great stock to add to your list of home improvement stocks to buy.
Lowe’s Companies (NYSE: LOW)
Lowe’s and Home Depot are the Target and Walmart of home improvement stocks. If you don’t shop at one then you probably shop at the other. The same is true when it comes to buying their stock. Many of the reasons to buy Home Depot stock also apply for buying Lowe’s.
In FY 2021, Lowe’s posted annual revenue of $89.6 billion. This was a 24.18% increase year over year from $72.15 billion. Lowe’s also posted a net income of $5.84 billion. This was a 36.3% increase YOY from $4.28 billion.
Right now, Lowe’s is using what it calls a “Total Home Solution.” Basically, it wants to provide a complete solution for every need in the home. Just like Home Depot, it focuses on consumers as well as professionals.
Lowe’s stock is up 57% so far in 2021. It’s also up 250% over the past 5 years.
Trex Company (NYSE: TREX)
Traditional wooden decks are incredibly expensive. You also usually need to get the wood treated every couple of years. On top of that, they are also in constant danger of splintering or cracking. Trex Company provides an alternative.
Trex is the world’s largest manufacturer of wood-alternative decking and railing. It uses 95% recycled materials to build its products. Each year, it redirects 400 million pounds of plastic from trash dumps in order to create plastic wood. Trex is one of the largest plastic recyclers in the United States.
When doing a side-by-side comparison of Trex and wood, it’s hard to not pick Trex. Trex’s decks generally do not require annual maintenance. They are sturdier and generally do not splinter. When you factor in the lifetime cost of staining and resealing a wooden deck, Trex is usually the cheaper option.
Consumers are starting to catch on. In 2020, Trex post $880.83 million in annual income. This was an 18.18% year-over-year increase from $745.35 million. It also posted a net income of $175.63 million. This was a 21.34% YOY increase from $144.74 million. Over the past 5 years, Trex’s profit has grown by about 30% annually, making it a great add to your list of home improvement stocks to invest in.
Trex stock is up 60% so far in 2021. It’s also up 644% over the past 5 years.
Home Improvement Stocks: Pool Corporation (Nasdaq: POOL)
Last but not least on this list of home improvement stocks to buy is Pool Corporation.
Pool Corporation is the nation’s largest manufacturer of two-car garages in the United States. Just kidding. As the name implies, it is the world’s leading distributor of swimming pool supplies and related products. In particular, it helps distribute over 200,000 products from vendors to wholesale customers. According to its website, Pool Corp. works with 2,200 vendors and about 120,000 wholesale customers. It offers products for pool maintenance, construction, and renovation. It also has solutions for irrigation and landscaping.
In 2020, Pool corporation posted an annual revenue of $3.94 billion. This was a 23% year-over-year increase from $3.2 billion. It also posted a net income of $366.74 million. This was a 40.2% YOY increase from $261.58. Over the past 5 years, Pool Corporation’s profits have been increasing by 23.8% annually.
One thing to consider is that most homeowners don’t put in a pool right away. This decision usually comes a few years after they buy the house. In 2021, there was definitely a surge of home-buying. Due to this, it’s easy to assume that 2022 and beyond might experience a surge in pool buying.
Pool Corporation’s stock is up about 60% so far in 2021. It’s also up about 460% over the past 5 years.
For more investment opportunities, sign up for the FREE Trade of the Day e-letter below. Trading experts Bryan Bottarelli and Karim Rahemtulla provide tips and tricks on how to navigate the stock market… and more! Join today.
I hope that you’ve found this article valuable when it comes to learning a few of the best home improvement stocks to buy. As usual, all investment decisions should be based on your own due diligence and risk tolerance.
About Teddy Stavetski
Ted Stavetski is the owner of Do Not Save Money, a financial blog that encourages readers to invest money instead of saving it. He has five years of experience as a business writer and has written for companies like SoFi, StockGPT, Benzinga, and more.