investingfromtheright

I am retired and take educated guesses on all things financial.

August 26, 2008

August 26. 2008: Lessons Learned, Ready To Buy Construction Related Stocks

A few weeks ago, I compared the cost of purchasing a new Hybrid vehicle you did not need a crowbar to fit your body and passengers into vs. a 2005-6 SUV. It was no contest. Even at $4.25/gallon, the SUV won hands down because they are priced to extinction.

I put my theory to the test, and two weeks ago purchased a fully equipped 2006 GMC silver Envoy with 23,400 miles for $13,150 - and the dealer threw in a brand new set of tires to boot. The Envoy had MSRP'd for over $32,000.00 when it was leased in January of 2007. And there is still the GM warranty through 36,000 miles.

The point being, don't fall for the latest gimmicks, rumors, political correctness or conventional thinking when you decide where to place your hard-earned cash.

In the midst of the present housing crisis, I formed a North Carolina LLC to build moderate income housing in an area where luxury homes were languishing - and contractors and their subs were having to find work to make ends meet. I am selling in this supposedly horrific housing market more homes than I can construct. Why? Because they are priced cheap ($124g-160g) and detailed with things people want (tile, 48inch showers, open floor plan and other attractive features. Going green? For most builders, going green for them means another buyer rip-off. Our green recommendations, which save about 35% of energy costs, include R-11 insulation, energy star inexpensive appliances, water saving shower and spigot heads, an energy miser water heater and caulk. Who in the heck needs a $40,000.00 green package when about $700.00 in additional costs saves that much energy? Reminds me of the SUV vs. the Hybrid.

Contrary to other views, I am finding home supply stores - including Home Depot and Lowe's - and builder supply companies, offering significant discounts on materials. I am finding as much as a 35% difference in cost by simply price shopping and demanding a discount to meet the best price. Another important point: labor is cheap now. Very cheap.Large general contractors ans McMansion builders are not providing work. Niche builders like our company provide steady work and great working conditions, including timely payments and hands-on encouragement. Tradesmen appreciate that.

Buyers need to be in good credit standing. Hooray!! Finally!! I appreciate that, because qualified buyers are much easier to find buying a home I build that they can afford. The smoke and mirrors of inflating a poor credit risk to prosperity through artificially raised home prices for a home the buyer cannot afford initially (thanks in large part to Realtors who want top dollar for the commission and the appraisers who still routinely ask "What value do you want to extract from your home?" instead of giving an honest price point) is receiving a long overdue farewell.

Opinions aside, I am a strong proponent of stocks that will benefit the home rehabber, remodeler, international construction and, needless to say, infrastructure.
I don't think that going green is going to be cause to let our road and bridges return to nature.

Here are a few picks:

USG (US Gypsum) - cheap, and vital to almost all construction and many infrastructure projects.
Vulcan Materials (VMC) - the basics of basic construction, and a takeover candidate in my opinion.
Wells Fargo (WFC) - still financing at excellent rates.
National City (NCC) - everybody wants to hate this large lender...that is a mistake.
Canadian National Railway (CNI) - transporting the basics and the stock is cheap.
Weyerhauser (WY) - wait and watch this security. Land, land,land.
Lowe's (LOW) - a better business model that Home Depot, increasingly friendly to contractors and homeowners looking for great appliance prices.
Wal-Mart (WMT) - lots of things to buy for the home at rock bottom prices...and contractors shop there for a number of items.
iShares Global Infrastructure ETF (IGF) - for everyone's needs.

If you are looking for the best cost-effective water saving devices for your home, google Niagara Conservation Efficiency Kits. Home builders hate this site, because you can save lots of money and water usage for practically nothing.

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