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3 Building Materials Stocks With Constructive Price Action

Tuesday, April 6, 2021 | Kate Stalter
3 Building Materials Stocks With Constructive Price Action Buyers are snapping up new homes, often sight unseen and paying with cash, generating booming business for companies such as Owens Corning (NYSE: OC), Builders FirstSource (NASDAQ: BLDR) and Cornerstone Building Brands (NYSE: CNR)

A new-to-you home generally involves some repairs and remodels. That’s benefiting the building and construction products industry. 

On top of the remodeling trend, homeowners are remodeling their existing homes as they spend more time inside, and want to upgrade their living spaces. According to the Joint Center of Housing Studies at Harvard, remodeling activity will grow this year, but at a slower rate than in 2020.

Meanwhile, supply chains are tight, costs for goods like lumber are rising fast and construction projects are taking longer than usual, due to high demand and the wait for materials. 

Owens Corning makes materials used for insulation, roofing and in other building applications. 

The stock cleared a consolidation in average volume on March 12, overcoming resistance between $88 and $89. The stock closed higher for the past three weeks, and closed Monday at $94.30, at the upper end of its session range and at its best level since January 2018.

The company reported fourth-quarter results in February. It earned $1.90 per share on revenue of $1.925 billion, beating analysts’ estimates on both the top- and bottom line. 

Owens Corning said its results were driven by growing demand in the single-family home markets for new construction, as well as remodeling. Its commercial market segment was also strong. 

The stock is up 14% since its earnings report. 

Year-to-date, Owens Corning is up 25.16% year-to-date and 172.44% over the past year. 

The stock is extended 7% from its March breakout. At that level, there starts to be a greater risk of getting shaken out in even a minor pullback. 

3 Building Materials Stocks With Constructive Price Action

Builders FirstSource sells building products for the construction and remodeling industry.

The stock is trading at all-time highs. On Monday, it rallied to a new session high of $49.04, but reversed lower to close at $47.59, up $0.22 or 0.45%. Volume was light. 

In March, Stifel Nicolaus resumed coverage of the stock with a buy rating and a price target of $56. The analyst cited the company’s own strength in a fragmented industry, and noted that “the outlook for housing in the U.S. remains robust as low rates/inventories have driven a significant supply/demand imbalance.” 

Earnings growth accelerated in the past three quarters, with revenue growing in the past two. 

The stock last broke out of a base in July 2020, and has traveled higher since then, bouncing around its 50-day moving average. This is another stock that’s technically frothy. It wouldn’t be surprising to see another base soon, as institutional investors take some profits. That would potentially clear the way for a new entry point at a slightly lower price. 
3 Building Materials Stocks With Constructive Price Action

Cornerstone Building Brands provides materials for the residential and commercial construction industries. The stock has been on a tear, gaining 58.41% year-to-date and 252.52% over the past year.

Shares closed Monday at $14.70, a two-and-a-half year high. The stock broke out of a cup-shaped base on March 8. It retreated the following week, but found support above its 50-day moving average and resumed its rally. 

One drawback of this stock is the company’s high debt level of $3.6 billion, which can add risk. However, Cornerstone has been deleveraging, and analysts believe it’s on the right path. 

In its most recent quarterly report, the company said it expects robust revenue growth, due to strong demand from single-family home building. It also expects commercial construction to bounce back following pandemic-era slowdowns in that segment.

All that should help Cornerstone generate cash to help pay down the debt. 

The stock is currently in a buy range; however, it’s very volatile, with a beta of 1.96, meaning that it is likely to show more whipsaw action than the broader market. Investors should be prepared for a wild ride, and have stops in place if nervous about pullbacks. 
3 Building Materials Stocks With Constructive Price Action

Featured Article: Market Timing - The Benefits and the Danger

7 Hotel Stocks Just Waiting For the Vaccine

Like any group of stocks related to travel and tourism, hotel stocks saw a steep drop in share prices in 2020. The leisure and hospitality sector that once had 15 million employees has lost 4 million jobs since February.

Many major cities will be feeling the ripple effects of the Covid-19 pandemic for years. However, there is ample evidence that shows the pandemic may be coming to an end. The number of new cases is dropping. The number of those getting vaccinated is rising. And even in the cities with the most restrictive mitigation measures, the slow process of reopening is beginning.

All of this can’t come fast enough for individuals who rely on the travel and tourism industry for their livelihood. Hotel chains had at least some revenue coming in the door. And when earnings season concludes, the more budget-friendly hotel chains may realize revenue that is 75% of its 2019 numbers. But that is not enough to bring the hotels to anywhere near full employment. Particularly with hotels that have bars and restaurants that have remained closed or open at limited capacity.

Many economists are optimistic that travel may begin to look more normal by the summer of this year. And the global economy may deliver 6.4% GDP growth this year. With that in mind, the hotel chains with the best fundamentals and the broadest footprint will be in the best position as the economy reopens.

View the "7 Hotel Stocks Just Waiting For the Vaccine".

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Owens Corning (OC)2.0$106.16+2.2%0.98%-21.19Hold$82.32
Cornerstone Building Brands (CNR)1.2$15.07+1.5%N/A-3.93Hold$12.50
Builders FirstSource (BLDR)1.9$47.55-0.9%N/A26.13Buy$54.36
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