MENU

3 reasons I’ve added Harvey Norman Holdings Limited to my watchlist

Harvey Norman Holdings Limited (ASX: HVN) was one of the hot stocks of the 1990’s and the business’ growth helped to secure co-founder and Executive Chairman Mr Gerry Harvey a billion dollar fortune.

For shareholders who only joined the registry in this century the returns haven’t been too exciting. The share price appreciation since January 2000 is just 6.2%, in contrast just holding the equivalent of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) would have returned an investor 78%.

Harvey Norman’s offering spans electronics and home furnishings – as such it doesn’t fit neatly into comparison with its listed retailing peer group. On the electronics side, JB Hi-Fi Limited (ASX: JBH) has been a star performer since listing on the ASX in 2003. JB Hi-Fi has in the eyes of many consumers become the ‘go-to’ for lowest priced electronics, a perception which for many years was always held by Harvey Norman.

Despite the many years of share price underperformance and the change in consumer perception, here are three reasons why I am positive about Harvey Norman’s future.

  1. When it comes to home furnishing and big ticket electronics, Harvey Norman remains a popular destination and its interest free offering is an important selling point. With housing construction and home sales currently tracking at high levels, in time this should flow through to higher sales at Harvey Norman as people kit out their new homes with everything from bedroom furniture to dining tables and ovens.
  2. As I mentioned above, founder Gerry Harvey remains involved in the day-to-day decision making process. Owning shares alongside a founder who still has most of his wealth tied up in the company is a definite positive.
  3. Valuation: Trading on a forecast FY 2015 price-to-earnings ratio of 14.6x and with a forecast fully franked dividend yield of 4.4% the stock appears reasonably priced considering the headwinds of what can only be described as soft consumer confidence conditions.

Why Now

I’m not buying Harvey Norman right now but the presence of a potential catalyst in the form of strong housing construction and home sales, a business with a manager focussed on increasing profits to shareholders and an undemanding valuation makes this stock one I’m keeping my eye on.

One more stock you really should know

Harvey Norman mighty not be a 'buy' just yet but there is one company that could make a great addition to your portfolio right now. Don't miss it! Top Motley Fool investment advisor Scott Phillips has just named his #1 dividend-paying stock for 2014-2015. With solid growth prospects and a fat, fully franked dividend, this ASX stock could be a huge winner for your portfolio. Discover the name and code FREE by clicking here now.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.