The U.S. and China took a meaningful step toward cooling trade tensions this week and announced a framework agreement in London that outlines potential mutual tariff reductions. Under the deal, China would ease rare-earth export restrictions, while the U.S. would loosen chip control measures. While structurally finalized, the framework still awaits formal approval from both presidents. However, it provides a brief moment of clarity in what has been an otherwise uncertain tariff standoff.

Markets were little changed on the news though, as investor sentiment remains cautious. Uncertainty around the broader economic outlook continues to fuel market volatility.

Navigating the noise requires a disciplined approach. By digging into the underlying financials, investors can uncover the true value of a stock – an essential skill for those looking to weather volatility, particularly with dividend-paying investments.

A particularly risky class of dividend stocks is those that offer decent yields and are backed by fundamentally sound businesses, yet trade at valuations that far exceed their true economic worth. These “dividend-trap” stocks carry extra risk with limited upside potential.

Want to learn how to spot them? Join us this Friday for our latest training session on identifying and avoiding “dividend-trap” stocks.

Our latest Long Idea is the opposite of a trap. This stock is positioned to benefit from the aging housing market and growth in its core markets. The company has strong fundamentals, returns ample capital to shareholders, and best of all, its stock is cheap.

Below, we present a large excerpt from our latest Long Idea report published this week, available to Pro and Institutional members. You can buy the full report a la carte here.

We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.

This stock offers favorable Risk/Reward based on the company’s:

  • position to benefit from an aging housing market,
  • growing core markets,
  • strong fundamentals and shareholder return,
  • quality executive compensation, and
  • cheap stock valuation.

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Benefit From the Aging Housing Market

One of the most significant industry tailwinds driving this company is the aging housing stock in the U.S. The typical home hit a record age of 36 years old in 2024, which is up from 27 years in 2012. This increase in age of homes is due to the lack of new supply (fewer homes being built) and the better affordability of older homes.

The U.S. has been building fewer homes since the construction industry took a hit in 2008. Only 9% of U.S. homes were built in the 2010’s, which represents the lowest share of any one decade since the 1940’s.

While this company can sell products for new construction, the rising age of homes creates even more demand for this company’s remodel and repair products, such as roofing, insulation, and doors.

Figure 1: Median Age of U.S. Homes: 2012 – 2024

Sources: Redfin and New Constructs

Strong Fundamentals Across Decades

This company has grown revenue and net operating profit after-tax (NOPAT) by 8% and 17% compounded annually since 2014, respectively. See Figure 3.

The company improved its NOPAT margin from 6% in 2014 to 14% in the TTM while invested capital turns remained the same at 0.8 over the same time. Rising NOPAT margins drive return on invested capital (ROIC) from 4% in 2014 to 11% in the TTM.

Additionally, the company’s Core Earnings grew 20% compounded annually from $209 million in 2014 to $1.4 billion in the TTM.

Figure 3: Revenue and NOPAT Since 2014

Sources: New Constructs, LLC and company filings

…there’s much more in the full report. You can buy the report a la carte here.

Or, become a Professional or Institutional member – they get all Long Idea reports.

I’ll keep sending information on quality sectors, industries, or specific companies until you’re ready to start your membership, but know that we expect this pick to outperform.

Interested in starting your membership to get access to all our Long Ideas? Get more details here.