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In my last weekly column, I talked about one of my favorite sectors to invest in — aerospace. And I followed that up with details on another of my favorite sectors earlier this week — domestic energy.
But you know where I generally do not want to invest? In the U.S. housing industry and related companies. Just look at the awful news this week out of one of my least-favorite companies in the sector, appliance-maker Whirlpool (WHR).
On Wednesday, the appliance maker said it earned just $179 million, or $2.25 a share, in the second quarter. That was down sharply from $198 million, or $2.44 a share, in the year-earlier period. If you strip out unusual items, you get $2.62 in profit per share — far below the average forecast of $2.86.
Not only that, but revenue sank more than 1 percent to $4.68 billion from $4.75 billion a year earlier. That also missed forecasts of $4.84 billion. And to top it all off, Whirlpool slashed its full-year ongoing EPS forecast to a range of $11.50 to $12. Wall Street was looking for $12.05.
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| The housing sector, as well as many stocks related to real estate and homebuilding, continues to lag other, better-performing segments of industry. |
Whirlpool said the factors holding results back included “lower unit volumes, higher material costs, foreign currency and increased investments in marketing, technology and products.” That’s quite a laundry list of problems.
Costs tied to recent acquisitions in China and Europe will hurt results as well. The company just said it would buy two-thirds of a troubled European appliance maker Indesit, a strategy that looks like it was conceived in desperation not for any logical reason.
While Whirlpool shares had a slight dead cat bounce after the results, I believe it’s in for rough sledding over time. And the thing is, Whirlpool is far from alone!
Shares of the biggest homebuilder in the U.S., D.R. Horton (DHI), tanked more than 11 percent yesterday after revenue plunged the most in five years. Plus, new home sales overall fell 8.1 percent in June — worse than even the most pessimistic estimate. The supply of homes for sale rose to the highest in almost four years.
Is it any wonder, then, that most stocks in the sector have been lagging or marking time all year? The SPDR S&P Homebuilders ETF (XHB) is trading for around $31 — unchanged since last May.
Frankly, you could have been investing in some of the stocks I’ve been highlighting in the Safe Money Report and done much better. To get on board, if you aren’t already, just click here or call us at 800-291-8565.
That doesn’t mean there aren’t some opportunities in the real estate sector. Some sub-sectors of the commercial market are doing fairly well, including lodging, office, and warehouse. And there are some select niche companies that have more going for them.
But by and large, it’s not your homebuilders, your mortgage lenders, or your residential suppliers — like the doggy Whirlpool — that you want to be messing around with in this analyst’s opinion!
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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If the Fed,after creating $Trillions of fiat currency and ripping off savers,by keeping interest rates well below actual inflation,can’t get housing going,they have been a complete failure.
My grade. F
As Walmart struggles is not this just one of the major signs of a struggling economy?
Of course it is. Could this ripple into China exports? What do you think? Walmart is China in many ways. As far as jobs, all lower pay then what they were and if you want to pay $12.00 for a McDonalds hamburger, vote for minimum wage increases, and shut down the rest of the small job shops. The dominoes are falling. Best to stick with gold silver guns ammo.