“Priced for perfection”

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, “Priced for perfection” Are you ready for two big catalysts coming up? They will be new inflation data and the start of the earnings season. Yesterday, several Fed officials reiterated their intention to hike rates further to clamp down on inflation. The group included Michael Barr, Mary Daly and Loretta Mester. But Wall Street already got the message. Traders are now keeping an eye on the upcoming earnings season. Morgan Stanley’s Michael Wilson warned that earnings forecasts will be critical since the valuations are higher in stocks. However, we’ve been on this boat before. In the last four quarters, analysts were bearish going into the earning season, but the S&P 500 averaged an over 6% gain after the reports were better than expected. - “Will this earnings season finally be the quarter that proves analysts correct?,” said Bespoke Investment Group’s strategists. - “If they stay negative every quarter, eventually they’ll be proven right, but betting against the market heading into earnings season recently proved to be an expensive ride.” Big banks (JPMorgan Chase, Citigroup and Wells Fargo) will kick off the season this Friday. It’s worthy to note that analysts already cut their estimates in the last few weeks, so companies may have an easier time to beat the expectations. (Photo: Jim Dyson / Getty Images) Home prices hit new highs: Mortgage rates skyrocketed in the past year, but it did nothing to cool down the home prices. It rose 0.7% natioanlly compare dwith April at a seasonally adjusted rate, according to the Black Knight Home Price Index. In fact, home prices have been accelerating in the last few months. - “There is no doubt that the housing market has reignited from a home price perspective,” said Andy Walden, vice president of enterprise research at Black Knight. Believe it or not, a 0.7% gain marks an annualized growth rate of 8.9%! - “Though the backward-looking annual growth rate dipped to 0.1%, May’s exceptionally strong +0.7% month-over-month gain would equate to an annualized growth rate of 8.9%, suggesting the annual home price growth rate would remain at or near 0% for only a short time before inflecting and trending sharply higher in coming months,” Walden added. Andy Walden, vice president of enterprise research at Black Knight (Photo: CNBC) What’s driving those price gains? Limited inventory. Homeowners are hesitant about selling their homes because many of them refinanced during the pandemic when the rates were rock-bottom. Taking on a new mortgage could double a homeowner’s mortgage payment. So, many prospective homebuyers are stuck with shopping for new homes. New listings are down about 25% from a year ago, and total inventory is now about half of what it was just before the pandemic. - “Inventory there continues to run above pre-pandemic levels, putting downward pressure on prices, which have fallen to -13.8% below peak, the largest gap of any market. Just eight of the top 50 markets are currently more than 5% below their 2022 peaks,” Walden said.  Dominant Brand In A Lucrative Industry Is Dirt-Cheap And Offers A Rare Buying Opportunity Today’s Stock Pick: Trex Company, Inc ([TREX]() Trex offers perhaps the most exciting trend in the home improvement industry. Listen, we’re trying to go green in everything. And wood decks would require a lot of trees, which bucks the trend of sustainability. What’s more, wood decks are painful to maintain. Wood will rot, warp, and splinter. And you’ll need to paint or stain wood seasonally. And eventually, it will fade due to termites and age. Anybody who owns a wood deck will remember these splinters that can pierce your fingers or feet. Trex is leading the revolution of using materials that are 95% recycled and reclaimed, like plastic bags, to create high-quality, attractive decks. In fact, they often look better than wood. And best of all, it requires virtually zero maintenance (except for regular cleaning) and lasts for 25+ years. (Source: Trex) And you can see how composite materials last longer than wood in the photo below: (Photo: timbertech.com) As a result, consumers are switching to composite decks more than ever. Composite has about 24% of the market share in decking, as of the most recent quarter. And composite continues to take about 2% share from wood every year. Trex CEO Bryan Fairbanks believes that composite would eventually hold about 45-50% of the market share: - “...we estimate composites account for approximately 25% of the total decking market but expect it will reach 45% to 50% in the future.” Each 1% market share would add ~$80 million to annual composite sales. Using the average of 2% growth, the composite market could grow by $160 million each year from taking the market share from wood alone. (Source: Trex) Cost comparison: Wood is cheaper upfront versus composite deck. The cheapest version by Trex costs about two times higher than wood. More premium versions would cost 3x or 4x more. You can see the comparison in the chart below: (Source: Trex) However, the return on investment will break even within three years and the long-term comparison is simply a no-brainer in favor of composite deck. It lasts longer and requires far less maintenance. Lifetime economics of Trex’s middle-tier version would save consumers two times more money than wood deck: (Source: Trex) Now, let’s look at how composite decks look. You’ll see how attractive they look. The grain patterns are similar to wood and composite decks can maintain their looks for decades: (Source: Trex) Trex’s composite decks sure look good, don’t you agree? Best of all, Trex thoroughly dominates this niche in composite decks. The company commands more than 60% of category web traffic through its sites – trex.com and decks.com. And it won multiple prestigious awards for top products, brand awareness, sustainability, fastest-growing business, and best mid-size companies. For example, Forbes named Trex as 12th best mid-size company in 2022: (Source: Trex) And the company is growing two times faster than the remodeling market: (Source: Trex) Sales growth: By now, you have an intuition that Trex’s sales growth is phenomenal, right? Indeed, it is. Sales grew by 14% CAGR since 2017: (Source: Trex) The stock just got cheaper: With its incredible financials, dominant market share, and surging growth, Trex’s stock is unsurprisingly popular. But thanks to the market correction, the stock price is now at the buying level. The price was at $140 in December, and it is now trading at $65 a share! There’s no doubt about it – Trex is a rare company that is in the right trend, dominates its niche, and holds pricing power. If you buy and hold for a decade, you are sure to come out ahead. Bottom line: The decking industry is going through a massive change, and Trex is at the forefront of this industry. It is known as the “Apple of the composite deck,” where its products are generally accepted as the highest-quality ones in the market. The stock is 53% off its all-time high, so grab this opportunity to add this wonderful company to your portfolio.   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance  If you no longer want to receive these messages, you may [click here]( to unsubscribe.