Black & Decker & Green

Is there a better friend to investors than fear?

Wait for the market to throw one of its "Gasp! Horror! Oh, the humanity!" moments, and you can pick up shares in great companies at good (or awesome) prices. And while I wouldn't say that the investment community is necessarily panicking about housing-related stocks such as Home Depot (NYSE: HD) and Black & Decker (NYSE: BDK), I'm finding an intriguing amount of value in each.

For today at least, let's take a look at the toolmaker. This wasn't an overwhelmingly strong quarter for ol' B&D, but it does highlight some of what makes this a solid company to have on your watch list.

Revenue growth was just 1% for the quarter, partly thanks to some difficult comps in the year-ago period. Even so, all of the individual operating units reported positive sales trends. What's more, the company continues to drill down on margins, and operating income posted a nice mid-single-digit gain. I don't want to dismiss the importance of individual business segment performance, but that takes up space, and investors can read the press release for themselves.

What I still find interesting about this company is the potential it has to continue growing and producing attractive cash flow for shareholders. Remember, folks, we're talking about a company with a long-term history of producing double-digit returns on capital well in excess of both the competition and the cost of that capital.

And let's talk about this housing issue, shall we? First of all, B&D gets maybe 20% of its business from the new home market, so that's not an overwhelming amount. Second, everybody seems to be forgetting or ignoring what's about to happen in terms of residential renovation and non-residential construction. I know, around here at least, that it's been tough to find workers to build you a deck -- they're all building new houses -- so there's likely to be some pent-up demand here.

Second, it's true that companies like Toll Brothers (NYSE: TOL) have been reporting unfavorable trends with new housing. But let's keep it in perspective -- lower growth and/or declines in new housing starts isn't exactly the same as no new construction.

I'd feel a little happier about Black & Decker stock if I wasn't hearing so much chatter about this new line of powerful cordless tools. I mean, I think new technology is great, but I'd rather it pass by unnoticed. All in all, though, I find the stock both undervalued and quite interesting vis-a-vis my margin of safety. Maybe I'm off-base on the whole housing question, but I find it hard not to like Black & Decker as a long-term idea.

Home Depot is a Motley Fool Inside Value recommendation. Can't bear to invest without a nice hefty margin of safety? LetMotley Fool Inside Valueguide you to the market's best bargains. Best of all, you can try it free for 30 days.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).