Everyone has been waiting for the housing to bottom and looking for plays. Although some are interested in getting into stocks such as KBH, LEN, an PHM, I disagree. The housing bubble took years to inflate and it will take years and much longer to recover. However, there's another market that appears stronger and that is home builders equipment stocks such as Home Depot and Lowes. Currently, people do not want to buy homes but what they do want to invest in is remodeling. People are aware that they will not get a chance to remodel their hopes at a cheaper time than this. Cheap building costs and low property tax values based on current low market values of homes make it attractive to remodel.
Over the long haul, HD and Lowes may be good long term value plays if they continue their downwards fall. According to Ockham Research, they have LOW rated a Hold "because—from a
valuation perspective—the stock looks slightly undervalued compared to historically normal price-to-sales and price-to-cash flow. Given normal circumstances we would anticipate the stock would fetch between $26.70 and $34.10, given current revenue and cash flow. However, the
stock will likely continue to struggle with the housing market weakness through the next quarter or two. If LOW and HD fall much further, the home improvement retailers will likely be a good long- term value play, as the housing crisis will not last forever.
