4 housing materials stocks leading the housing boom

Investors who are reading in the news every day about how house prices are going up in Sydney and Melbourne should consider following the companies that supply building materials and fixtures.

Housing demand will push more new home sales up because established neighbourhoods are usually more expensive to buy into. In addition, unit sales in and near CBD areas  are actually rising faster than houses.

Here are four companies that provide the materials and items to finish off new dwellings.

Hills Holdings (ASX: HIL) manufactures construction materials, as well as electronics and communications products. The share price has already risen up from $1 to $1.77 since late June, when it began to sell off assets and businesses that were not considered core business anymore, and have made the company a much leaner competitor.

It plans to expand more into electronics and communications goods that have higher profit margins, and has set its goal on improving earnings. The market welcomed that move, which coincided well with the housing market recovery.

Plumbing and bathroom products supplier Reece Australia (ASX: REH) is a $3 billion business by market capitalisation, and reported its highest ever net profit after tax (NPAT) of $119 million in 2013. It controls 20% of the wholesale plumbing goods market, way ahead of the 6% market share Fletcher Building (ASX: FBU) has.

It has just hit a share price all-time high of $32, and has a price-earnings ratio of 25, so the market is pricing in strong growth over the near term.

Fletcher Building, which provides building materials and products and is valued at $5.7 billion by market capitalisation, has risen in share price about 45% over the past year.

Revenue growth has been in line with its peers, and its sheer size in the market means it will be supplying a lot of materials in general for the housing market.

GWA Group (ASX: GWA) supplies building fixtures and fittings covering bathrooms, kitchens, heating/cooling, and access systems. Over the past two years it has seen a downturn in NPAT from $63 million to $38.6 million, yet its share price has doubled from about $1.60 in Nov 2012 to $3.18 currently.

Foolish takeaway

Housing-related stocks are cyclical in nature, so to get the maximum return possible, it is better to start early on in the cyclical upturn. When new building approvals statistics started to trend upwards in September and October 2012, these companies started their rise.

Typical cycles might last five to seven years, so we are still early in that period. Take a look at these stocks and do your research well, noting which have had stronger growth rates in the near past.

Looking for good growth stocks?

Another great growth story is Telstra, the Aussie telecom giant, and the smart money is on the move now... Discover whether you should buy, sell or hold Telstra shares in our brand-new Telstra report, written by a top Motley Fool analyst. It’s free, click here for your instant download!

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!