Profit On…Kitchen Cabinets? 12/1 2017

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Stocks have had a wild ride today, gyrating on each new piece of political news. After modest gains early in the session, all major indexes are down after news of the indictment of Michael Flynn, a former top advisor to US President Donald Trump. Concurrently, US tax reform efforts hit a legislative speedbump, but the law is still widely expected to pass the Senate in the coming days.

Our Top Performer today is a long play that managed to pierce sagging market momentum and record solid gains. Our Top Performer reports often center on big mining finds, huge international acquisitions, or trendy blockchain companies.

Today’s Top Gainer is a different sort of stock: a solid cabinet-maker on a nice growth run.

American Woodmark (AMWD): up 20% on strong revenue, plus acquisition plans.

Amercian Woodmark announced their Q2 financial results this morning, alongside acquisition news. American Woodmark is a major US cabinet-maker.

AMWD posted solid financial results, maintaining their profit rate and increasing overall cash flow. Sales grew modestly, and increased cash flows are emanating from decreased customer-costs (eg. returns). That said, these financials were solid but unspectacular. Today’s gains are likely driven by AMWD’s growth plans.

As part of the same announcement, AMWD announced that they will be acquiring RSI home products, a major seller of kitchen and bath cabinetry. AMWD will assume a large debt-load borne by RSI as part of the purchase agreement. Investors appeared optimistic about the market power the new cabinet-titan would possess, and bought the stock on strong volume, driving it higher by as much as 30%. It had consolidated up 20% at the time of this writing.

Today’s news event mars the latest bit of momentum for AMWD, which has been on a slow but steady, years-long bull run at this point. Some investors are turning to consumer-facing companies as worry increases about overvaluation among technology stocks, and other more trendy sectors.

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