Charles Bobrinskoy on Housing Value, Retail Earnings, and Tariffs

Finding Value in Housing Stocks

• 💡 Value investing is quietly outperforming growth, with housing being a key sector where opportunities exist.
• 🎯 Normally, cyclical industries like housing are bought when earnings are down and P/E multiples are high. Currently, there's an opportunity to buy at low depressed earnings with a very low multiple.
• 🏠 Even if new home construction slows, a normal repair and remodel cycle is expected due to accumulated home equity and a desire to invest in existing properties.

Promising Companies in the Housing Sector

• 🏠 D.R. Horton and Lennar are mentioned as companies benefiting from the housing market.
• ⚡ Generac, which builds backup generators, is seeing increased demand as weather events become more frequent.
• 💡 Resideo Technologies, the former Honeywell thermostat business, is highlighted for its potential after settling a large annual payment to Honeywell, leading to significantly higher future earnings.

Concerns Regarding Tariffs and Retail Earnings

• ⚠️ Tariffs are identified as a significant concern, particularly their potential impact on parts, materials, and ultimately retail earnings.
• 🛒 Major retailers like Lowe's and Home Depot are expected to face sticker shock as they absorb and potentially pass on the costs associated with new tariffs.
• 📈 While some companies in the building products sector have a good setup, the impact of tariffs on retail creates nervousness and caution.

Labor and Material Costs

• 💰 While labor costs are increasing, management teams suggest it's not as significant an issue as perceived, with many in the construction industry ensuring their workforce is stable.
• 🛠️ The cost of parts and materials is a concern, especially with the overhang of tariffs potentially increasing prices.