Our general view, on the builders, was that 7% mortgage rates (see second row, third column) would make building very difficult, both the supply of it, and the demand for it, and that stocks exposed to those lines of work, like Hardies (JHX, fiber cement, cladding) and Reliance Worldwide (RWC, behind the wall plumbing) would struggle.

That didn’t really happen, JHX took lots of market share, and RWC simply did “better than expected”, despite the slow down in housing turnover (which is usually when lots of r&r type work happens).

That general story applied to most of the US home builders too, who went on a tear from 2022 onwards, even as home sales and housing permits plunged.

So we figured we’d missed out, and would wait until the next cycle. It always comes again.

And, perhaps that’s getting underway now, at least, the leg down in building activity, as you can see from the Bloomberg newswire below.

The big building products provider, Builders FirstSource, citing cycle weakness, in multi-fam, and dropping by 20%.

Now they didn’t even cut guidance, either, and the stock is only trading on 12x, hardly super expensive, but if you think that’s the first concrete sign that the cycle has turned (alongside Jeld-Wen’s comments) than the -20% makes more sense. 

RWC just held a trading update, in which they seemed to suggest things were trundling along well enough to reiterate guidance.

But the above is the sort of thing that compels us to remain on the sidelines.

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