Home furnishing stocks have taken a back seat in recent months as investors bid up sectors that look set to benefit the most from a successful COVID-19 vaccine, such as beaten-down hospitality and travel names.
However, looking ahead, the home furnishing group remains supported by longer-term work-from-home trends after the pandemic. Global Workplace Analytics, for instance, estimates that 25% to 30% of the workforce will work from home on multiple days per week by the end of 2021. Furthermore, a possible second relief stimulus check this year or early next year could see consumers rush out to buy furniture for their home office space.
- The home furnishing group remains supported by longer-term work-from-home trends after the pandemic.
- Buyers have supported Whirlpool Corporation (WHR) shares near the lower trendline of a trading range.
- Leggett & Platt, Incorporated (LEG) shares have also encountered support from a trading range's lower trendline.
Below, we take a closer look at two large-cap home furnishing stocks that have retraced to crucial chart support and turn to technical analysis to identify possible trading opportunities.
Whirlpool Corporation (WHR)
With a market capitalization nudging $12 billion, Whirlpool manufactures and markets home appliances and related products through four geographic segments: North America, Europe/Middle East/Africa, Latin America, and Asia. The Michigan-based appliance maker posted third-quarter bottom-line growth of 74% from a year earlier, thanks to the continuing demand for home appliances during the pandemic. Moreover, management now expects a full-year profit of between $17.50 and $18 per share, substantially higher than Wall Street's forecast of $13.24 per share. As of Dec. 16, 2020, Whirlpool stock offers an enticing 2.72% dividend yield and is trading 31.15% higher on the year. Over the past month, the shares have eked out a 0.61% gain.
The share price has oscillated within a 25-point trading range since early October, offering several high-probability trades for those who favor rangebound strategies. In recent sessions, buyers have defended the range's lower trendline, which finds support from the August swing high. Active traders who enter here should consider booking profits on a test of the trading range's top trendline at $206 while protecting capital with a stop-loss order placed under last week's low at $181.09.
In stock trading, one point equals $1. If a stock opens a session at $23 and ends the day at $25, it is said to have gone up two points.
Leggett & Platt, Incorporated (LEG)
Leggett & Platt designs and produces furniture, bedding products, and flooring. The 137-year-old furniture company reported third quarter adjusted earnings of 80 cents per share on revenues of $1.2 billion. While earning per share (EPS) grew 5.3% from the year-ago quarter, the top line slipped 3% due to weaker organic sales. Goldman Sachs analyst Susan Maklari upgraded the stock last month to "buy" from "neutral" and raised her price target from $46 to $52. Maklari sees utilization rates in higher-margin segments supporting earnings for several quarters. The analyst also believes that Leggett & Platt's positioning and company-specific efforts should facilitate faster revenue expansion. As of Dec. 16, 2020, Leggett & Platt shares have a market value of $5.49 billion, offer a dividend yield of nearly 4%, and are trading virtually flat over the past month. Year to date, the stock has fallen 15.42%.
The shares have traded sideways since the 50-day simple moving average (SMA) crossed back above the 200-day SMA in early September to generate a golden cross buy signal. More recently, the price rallied Tuesday from $40, where the stock encounters support from the trading range's lower trendline. Those who take a long position in this area should think about setting a profit target near the range's opposing side at $45.30. A stop-loss order placed under this month's low at $39.90 offers a favorable risk/reward ratio of 1:2.4, assuming a fill at yesterday's $41.39 closing price.
The golden cross is a bullish signal on a stock chart in which a relatively short-term moving average crosses above a long-term moving average.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.