Amass Returns with Masco Corporationhttp://www.fool.com/investing/general/2013/10/10/3-derivative-plays-of-home-depot.aspx Joseph Solitro
October 10, 2013
Sometimes the best investment plays are in companies that simply supply the companies that do the real dirty work, selling. The hard part is finding a retailer that is growing earnings at a rapid pace and that dominates its industry; enter Home Depot (NYSE: HD). Home Depot is the largest home improvement specialty retailer in the world. It has been growing earnings and returning billions of dollars to its shareholders while its suppliers grow as well. Masco Corporation (NYSE: MAS) is arguably the top supplier and beneficiary from Home Depot's continued rise and the company has been growing at an accelerated rate itself. Let's take a deep look and see what Masco has to offer investors.
The perfectly executed plan
Masco's position within Home Depot had nothing to do with luck or being in the right place at the right time, it was a perfectly executed plan by management. In 1999, Masco acquired five companies for $3.8 billion and all five were suppliers to Home Depot. These companies were:
It was a seamless transition following these buyouts and Masco has continued all relations with Home Depot since. Masco has continued making strategic acquisitions since 1999. For example, in 2001 it bought Milgard, the largest manufacturer of vinyl windows and sliding glass doors in the western United States. The company could easily grow its current brand portfolio by the billions of dollars for decades, but I do not think it is done acquiring companies just yet. I expect Masco to continue finding undervalued, small-market companies and turning them into household names.
So how important is Home Depot...
Do not fear Lowe's
In the same 2012 annual report, Masco stated that Lowe's made up a little under 10% of consolidated net sales, making the company a very important customer. Lowe's carries several key Masco brands, such as Delta, KraftMaid, Peerless, Aqua Glass, Hansgrohe, and Axor, boosting their exposure, popularity, and demand. I believe Masco's position within the two largest home improvement retailers along with its many other distribution channels will allow for exponential growth in the future.
The summer report
It was a great quarter in which earnings and revenue grew year-over-year, plus margins expanded