In a speech to business leaders in Houston last week, I pointed out that one of the reasons Donald Trump is doing so well in the presidential polls is he at least sounds like he’s certain of himself at such an economically uncertain time. I underscored the point about uncertainty by saying most of the people in the room had probably only checked their stock portfolios about 30 times before lunch.
There were many nods of agreement.
With the markets being so volatile, what's a sure thing? Hard to say. But, Martin Tiller at Nasdaq writes that publicly traded construction firms are doing particularly well:
“In all of the panic of the last couple of weeks, and with traders and pundits seemingly fixated on events in China, there is one major American domestic success story that is being somewhat overlooked. The construction business in America is booming. There is growth on all levels and this morning’s ADP private jobs numbers confirmed that once again. Once again construction was an important part of the monthly job growth, with around 17,000 jobs added in the sector.”
Okay, Mr. Tiller. But what about the natural argument that there’s a bubble that will burst and then we’ll be back to square one?
“I would normally have sympathy with the contrarian view of a booming business, but in this case there are several reasons to believe that there is a lot more to come.
First, construction is just now really catching up with other businesses. Housing arguably caused the last recession and it took several years for the market to absorb the entire excess inventory from that time and for demand to pick up but now that that is happening, things are moving rapidly. Secondly, rental costs for both housing and business space continue to rise. The reluctance to buy that afflicted the entire market pushed many into renting, but as costs continue to rise, owning is looking increasingly attractive.”
Tiller also points out that many smart investors have placed their bets with building supply companies and home improvement retailers:
“The big boys in that field, Lowe’s (LOW) and Home Depot (HD) are both trading at levels that represent about a 10 percent decline over the last two weeks. The P/Es in these cases are less obviously attractive at around 17 and 18 respectively, but these companies continue to dominate their market.”
Construction firms and related businesses are investing here in America and, unlike other sectors of the economy, are not as dependent on what happens overseas. There is, of course, a growing interdependence between the economies of nations. But, keeping the construction industry strong at home means careers and investment locally while presenting opportunities for investors at the national level.
