Boston Beer, D.R. Horton, Rollins: Surprise Winners Through Covid-19

September 22nd, 2020 by Trefis Team
DHI: D.R. Horton logo
DHI
D.R. Horton

Back in March 2020, as the stock markets were dropping as Covid-19 cases started spreading outside China and the economy bracing for a lockdown, would thoughtful investors have bet on housing, breweries, and home improvement stocks? Probably not. These sectors didn’t fare too well though the 2008 recession and investors would have likely stayed clear as the U.S. economy was headed for the biggest economic contraction in decades. However, about six months hence, it turns out many of the stocks in these sectors, including D. R. Horton and Lennar Homes – two of the largest U.S. homebuilders, Boston Beer Company, and others have actually outperformed the market significantly. In our theme Covid-19 Surprise Winners, we’ve identified a group of large-cap stocks that should have actually underperformed due to Covid-19, but ended up outperforming.

Boston Beer Company (SAM) – the brewer of Samuel Adams beer, has increasingly diversified into other drinks such as hard seltzers and sweeter alcoholic beverages. The uptake of the company’s newer offerings has been strong this year, with Revenue jumping 42% year-over-year over the most recent quarter. The stock is up 133% year-to-date. (How Boston Beer Company’s performance through Covid-19 compares with 2008 crisis)

SAM

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Rollins (ROL) is a leader in the pest control space, operating brands such as Orkin and Western Pest Services. While the company was impacted by the closure of businesses and offices through the initial lockdowns, it has doubled down on disinfectant services through the pandemic, while also witnessing strong residential demand. The stock has rallied 59% year-to-date.

Tractor Supply Company (TSCO) is a retailer focused on rural markets, selling a wide range of home improvement, agriculture, lawn, and garden maintenance products.  The company has been witnessing strong demand for its home and farm supplies through the pandemic, taking its stock up 48% year-to-date.

Pool Corporation (POOL) is a wholesale distributor of swimming pool supplies and equipment. The company has seen demand grow through the pandemic, as people spend more time at home and put their swimming pools to better use. The stock is up 42% year-to-date. (How Pool Corporation’s stock performance through Covid-19 compares with the 2008 crisis)

D.R. Horton (DHI) one of the largest home construction companies in the U.S.  is benefiting from strong housing prices and low mortgage rates. The trend of working remotely could increase demand for larger homes in the suburbs as people look to upsize or move away from cities. The stock is up 38% year-to-date.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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