5 Housing Stocks to Watch

1. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 72

Lowe’s Companies, Inc. (NYSE:LOW) is an American home improvement retailer that sells appliances, home decor, paint, hardware, lighting, lumber and building materials, and tools. Lowe’s Companies, Inc. (NYSE:LOW)’s strong execution during the pandemic showed that its turnaround is truly working and that improvement can provide a boost now that the economy is steadily returning to normal.

On February 24, Wedbush analyst Seth Basham lowered the price target on Lowe’s Companies, Inc. (NYSE:LOW) to $240 from $260 and kept a Neutral rating on the shares. The analyst noted that Lowe’s Companies, Inc. (NYSE:LOW) reported Q4 results that were approximately in line with buy side expectations and ahead of consensus. Despite prospects for stronger operating margin expansion and EPS growth fueled primarily by productivity initiatives that continue to gain traction, the analyst remains on the sidelines given a less optimistic sector outlook for 2022.

According to the Q4 database of Insider Monkey, 72 hedge funds reported owning stakes in Lowe’s Companies, Inc. (NYSE:LOW), valued at $6.8 billion, as compared to 60 funds the previous quarter holding stakes worth $5 billion. Bill Ackman’s Pershing Square is the biggest stakeholder of the company, with 10.2 million shares worth $2.6 billion. 

Here is what Pershing Square Capital Management has to say about Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter:

“Lowe’s is a high-quality business with significant long-term earnings growth potential

Supportive macroeconomic backdrop

-Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog

-COVID-19 causing millennials to enter the housing market

Positioned to grow EPS largely independent of market conditions

-Idiosyncratic revenue opportunities driving share gains

-Self-help initiatives catalyzing operating margin expansion

-Buybacks representing ~8% of current market capitalization planned for 2022

Multi-year business transformation with substantial earnings upside

-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing

-Potential to generate high-teens EPS growth over the next several years.

Lowe’s continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”

You can also take a look at 10 Smart Home Technology Stocks To Buy Today and 10 Stocks in Focus After Posting Their Earnings Reports. 

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