Home Depot should be in your WatchList

2021年4月16日

There is a macro narrative underway that is wildly bullish for Home Depot.

The fuse being lit here under a MASSIVE bull run evident within the latest WSJ article. Get ready for a flood of improvements and investments in homes. Keep in mind how cash flush consumers are, and how pent up they have been in their homes. The WSJ certainly made the case when they said:

• "The estimate represents a 52% rise in the nation’s home shortage compared with 2018, the first time Freddie Mac quantified the shortfall."
  
• “We should have almost four million more housing units if we had kept up with demand the last few years,” Mr. Khater said. “This is what you get when you underbuild for 10 years.”
  

Housing my friends is about to get red red hot.

https://www.wsj.com/articles/u-s-housing-market-is-nearly-4-million-homes-short-of-buyer-demand-11618484400

Let's also take a peek at flatbed capacity folks. Flatbeds provide capacity for the construction sector and massive commodities within the logistics sector. New truck sales are up ...gulp 424% in march!

https://www.ttnews.com/articles/north-american-class-8-orders-424-40000-march

Demand is wild, but who are going to drive all of these trucks with a driver shortage underway at exactly the same time?

• Load postings (loads shippers need transported) are up +129.9% Y/Y
  
• Truck postings (trucks available to haul loads) -6.9% Y/Y
  

-Stats provided by DAT

Let's drill in a bit further folks! This upcoming ratio is a bit like saying... the average temperature in North America is 70.7 degrees Fahrenheit, or 21.5 degrees Celsius for our friends across the pond. Not very helpful if you are trying to zero in to the Florida market vs the Alaska market. But regardless this data is stunning as the current load-to-truck ratio for flatbed is over 80 loads per trucks. In some very hot markets it is well over 120 loads per truck. Think about what that means! The average driver has over 80 loads to select from before hauling his freight. This enables him to bid himself much higher. Obviously this cost to manufacturers and distributors or even those providing raw goods in lowlier verticals all can not just shoulder this costs - it must get passed on to consumers. Clearly this will result in further inflation pressure. It is stunning if you think of it that Dr Michael Burry predicted that the inflation pressures would be observed initially within supply chains...and yes he nailed it.

Citation of chart displaying Load-to-truck ratio:

https://www.facebook.com/translogistics/photos/a.434807506560187/6162097583831122/

There are many ways to monetize the current situation. And I recommend a plethora of strategies to diversify risk. And this includes exposure to transportation equity products, building materials, commodities, construction starts, and yes Home Depot.

The final comment I have - and please keep in mind I do not subscribe to political tribalism, I play it monk like focused on how we can be opportunistic in any environment-if Biden passes the infrastructure package again this would lead to a massive supply crunch in many of the areas outlined above. Especially flatbed capacity. Keep in mind flatbed seasonality typically does not kick up until May-June when housing and construction starts are heating up.

As always dear traders if you found this content helpful please be sure to like, share, and perhaps tell me what I may be missing in my content here.

Final content share that is a MUST READ. Manufacturing PMI is at 64.7% ... So for those unfamiliar with what that means if the PMI index is under 50 we are in a state of contraction, growth mode is evident with numbers above 50. A reading of 64.7% is frankly remarkable.

https://www.ismworld.org/globalassets/pub/research-and-surveys/rob/pmi/rob202104pmi.pdf

Pivot Points
Bollingers/EMA/Volume

Can you see the trend friends?



Home Depot is great as well because keep in mind on days equities sold off in the broader market, they continued to march higher as well.

Let the roaring 20's commence! And please be sure to follow me on TradingView as I will let you know any helpful content I can find as we navigate through the rest of this decade.

Good fortunes to you dear traders!