EFTA01071289.pdf

J.P.. Morgan Global Equity Strategy and Quantitative Research 13 August 2015 US Equity Strategy 100 Ideas Levered to the Housing Recovery Housing market fundamentals remain constructive with a pick-up in demand, US Equity Strategy tightening supply, high affordability, low household leverage, and easing credit standards. Taken together, we believe these are likely to be drivers of an Dubravko Lakos-BuJas AC (1-212) 622-3601 outperformance of equities levered to the housing recovery. In this report, we identify dubravko.lakos-bujas@nmorgan.00m 100 such companies with direct or indirect exposure to housing from a diverse list of industries — the mix ranges from the obvious Homebuilders and Building Products to Bhupinder Singh (t-212)622-9812 derivative plays in Durables, Retail, and Financials, see Figure 3. After more than six bhupinder.singh@jpmorgan.com years into this recovery, we believe there are few opportunities in US equities that offer stronger growth and cheaper valuation than housing. Scott A Linstone (1-212) 622-9970 Key variables for housing recovery — the job market continues to strengthen, scott.a.linstonegnmorgan.com consumer confidence remains elevated, level of interest rates remains relatively Narendra Singh low and risk to housing from rising rates should remain contained over the (t-212) 622-0087 coming quarters. We recognize housing is interest-sensitive and the Fed is about to narendra2.singh©jpmorgan.com embark on a tightening campaign. However, long rates which matter more for housing ArJun Mehra (AJ) are already pricing in Fed rate hikes. Even if the Fed surprises by tightening faster than (1-212) 622-8030 what the market anticipates, LP. Morgan expects to see a curve flattening and alun.mehra©jpmorgan.com conventional mortgage rates should not move nearly as much as the funds rate. J.P. Morgan Securities LLC Historically, bear flatteners are not associated with negative performance for housing stocks. As shown in Figure 34, homebuilders have outperformed the market during Table of Contents Executive Summary 1 bear flaneners. On the contrary, bear and bull steepeners cany worse implications for performance, underlining the importance of long rates for the housing market. Industries Levered to Housing 3 Housing Stock Performance 4 J.P. Morgan Economists expect residential investment growth of 8% this year and Valuation. Growth. Sentiment 5 7% in 2016. Despite the 63% increase in residential investment from $366b at the Stock Screen: 100 Ideas 6 bottom (3Q10) to $595b, current activity remains depressed at 3% of GDP (vs. 4.7% I-lousing Macro Rivers avg since 1949). Outside of key macro level data suggesting significant residential Derrend 9 investment growth, commodities linked to housing are rising and the recent search Supply 11 trends point to an improvement in homebuyer interest (see Figure 22). The following Aft ordablity 12 drivers bode well for a continued recovery and growth in residential investment: Credit 14 Relative Valuation 15 • Demand: should firm on strong labor market trends (declining unemployment Commodity Prices 16 rate + expected rise in wages), high consumer confidence, stronger household Equity Fundamentals 17 formation, and low vacancy rates. Since the start of the recovery, the economy has Characteristics of Housing Stocks 20 created more than I I million net jobs with the unemployment rate approaching 5%. Housing Basket JPAIMOUS <tides> 24 This combined with near-peak consumer sentiment is encouraging household formation. Due to the severity of the last recession, we believe there is pent-up Bloomberg subscribers can use the ticker JPAMHOUS <Index, to access tracking demand for housing, with household formation at a deficit of around 5 million, see information on a basket created by the J.P. Figure 20. Also, buying vs. renting is becoming increasingly more attractive with the Morgan Delta One desk to leverage the theme discussed in this report. Over time. the median home price to rent ratio at the lowest level in 15 years, see Figure 32. performance of JPAMHOUS <Index, could diverge from returns quoted in our research. • Sum*: tighter with new and existing home inventory sharply lower. The because of differences in methodology. J.P. existing home supply declined from -4 million units at peak to 2.3m recently, which Morgan Research does not provide research coverage of this basket and investors should is similar to levels seen prior to the housing boom. As for new home inventory, the not expect continuous analysis or addreonal supply is even tighter at 215k units compared to 570k at last peak and 300k prior to reports relating to it. For more information. please contact your J.P. Morgan salesperson the last housing boom, see Figure 23. If adjusted for population growth, the current or the Della One Desk. supply picture looks even more constructive. See page 28 for analyst certification and important disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com EFTA01071289 Oubravko Lakos-Bujas Global Equity Strategy and Quantitative Research (1-212) 622-3601 13 August 2015 dubravko.lakos-bujas@jamorgan.com J.P. Morgan • Credit: household balance sheets at best level in more than a decade as lenders easing standards. During this recovery, households have significantly delevered, with current household debt at the lowest level in more than 10 years and mortgage service ratio at an all-time low, see Figure 36. Also, a higher percentage of homebuyers are likely to qualify for a mortgage loan with more lenders easing rather than tightening credit standards. And for some, credit scores should be improving as foreclosure related hits on credit reports cycle through after 7 years on record. • Value: compared to most asset classes, relative valuation more attractive for housing. Residential homes sell at a discount to equities, gold, and oil (i.e., it takes 137 units of S&P 500 index to purchase a median priced home in the US, which is a 48% discount to its long-term median of 260 units, see Figure 39). Even after the recent decline in commodities, Homes are a cheaper hard-asset alternative to Gold, see Figure 40. • Risk: rising home prices to household income ratio and higher rates a concern. While the job market outlook has improved homebuyer sentiment, the tepid rise in household income (+5% since 2010) compared to a more significant rebound in home prices (up 34% from the low) is a risk to a more robust housing recovery, in our view. Consequentially, the new single-family home price to household income ratio has risen to near record (5.4 years vs. 4.0 median since 1966), see Figure 42. Also, as the Fed begins to raise rates, this could be a further negative for affordability given that every 50bp increase in mortgage rates is equivalent to roughly 5% increase in home prices. However, we feel that the most likely scenario is a bear flattener under which the mid-to-long portion of the curve (which is more important for mortgage rates) is less affected. Housing stocks enjoy stronger fundamentals with domestic exposure at a cheaper multiple than the market: growth at a reasonable price. After more than six years into this recovery, we believe there are few opportunities that offer stronger growth and cheaper valuation than housing. In fact, if housing stocks were a unique GICS sector, it would offer the strongest earnings growth and second cheapest valuation. Based on consensus estimates, housing stocks are expected to grow earnings by roughly 50% vs. 30% for S&P 1500 companies during 2015 through 2016. As for valuation, we believe the domestic linked housing sector does not deserve multiples inline with the cheapest Materials sector, which has meaningful exposure to China. • Improving sentiment implies that investors no longer view housing as toxic and there could be additional accumulation by institutional investors. Whether you gauge the sentiment by the Street's analyst ratings or short interest, housing stocks have seen market participants slowly turn more constructive. Housing stocks have an elevated short interest as % of float (4.6% current vs. 17% at peak) compared to rest of the market at 3.6%, see Figure 10. The Street's sentiment has also been improving with the average stock rating now similar to the rest of the market, see Figure II. • Higher revenue growth and margin expansion is expected to drive double-digit earnings growth. Housing stocks on average offer stronger revenue growth between 5-6% in the coming quarter compared to low single-digit growth for S&P 500 (ex-energy). This combined with margin expansion is expected to drive double-digit earnings growth in the upcoming quarters. • Significant margin expansion: the Street is expecting significant expansion for housing with net margins expected to increase from 6.4% (last four quarters) to 7.1% over the next four quarters (3Q15-2Q16), see Figure 50. Based on estimates, margin expansion is expected to be driven by declining commodity prices while SG&A expenses are expected to rise. • Shareholder yield now near 5%, higher than S&P 500. Perhaps due to the uneven growth and highly cyclical nature of most companies levered to housing, the shareholder yield has been volatile. In the last twelve months, the total shareholder yield increased to 4.7%, which is higher than the S&P 500 at 4.1%, which is attractive for yield-seeking investors in a scarce yield environment. J.P. Morgan US Housing Basket (JPAMHOUS <Index>): a preferred way to play the recovery in housing. The J.P. Morgan US Housing Basket is composed of a diversified portfolio of companies that have direct or indirect exposure to the US housing market and should benefit from the continued pick-up in residential investment. Basket constituents are screened for liquidity (trade at least $1OM ADV), and include direct beneficiaries of housing (e.g., Homebuilders, Building Products) as well as derivative industry plays (e.g., Durables, Retail, Financials). The basket contains 65 names, and the weights are optimized to replicate as closely as possible to an equal-weighted basket, subject to a maximum of 10% of ADV traded in any single name within a $100M basket. The basket can be accessed on Bloomberg via ticker JPAMHOUS <Index>. • Basket Performance: An examination of hypothetical performance shows the basket — JPAMHOUS <Index> - would have returned +17.7% on an annualized basis over the last three years, narrowly outperforming the S&P Homebuilders Select Industry Index (SPSIHOTR Index), which returned +17.3% over the same period. The correlation of the basket to the SPSIHOTR Index is 93%, and the recent 6M realized volatility of the basket is 11.9% (the realized volatility of the SPSIHOTR Index over the same time frame is more than 2 vol points higher at 14.1%). 2 EFTA01071290 Dubravko Lakos-Bujas (1-212) 622-3601 Global Equity Strategy and Quantitative Research 13 August 2015 J.P.Morgan dubrayko.lakos-bujas@jomorgan.com Equities Levered to a Recovery in Residential Investment Housing market fundamentals remain constructive with a pick-up in demand, tightening supply, high affordability, low household leverage, and easing credit standards. Takcn together, we believe these arc likely to be drivers of an outperfonnance of equities levered to the housing recovery. In this report, we identify 100 such companies with direct or indirect exposure to housing from a diverse list of industries — the mix ranges from the obvious Homebuilders and Building Products to derivative plays in Durables, Retail, and Financials, see Figure 3. We recommend investors gain exposure to housing stocks for their growth at a cheaper valuation. Figure 1: Residential Construction as % of GDP Figure 2: Residential Construction Since 1949 USD billion, sear so:o s)e6 A91 sera 5616 5519 $516 SSBS 95tI 3619 5196 am 3400 3210 3160 - 2% 1119 1964 1959 1961 Me 1974 1979 1904 1959 1994 1999 2001 2009 2014 Source: J.P. Ragan and Blacoterg Source: J.P. Morgan and Bkcirsig Figure 3: Industries Tied to Housing See Figure 12 through Figure 14 for a full list of 100 ideas bed to the housing recovery Mortgage/Title Insurance Construction Materials Mortgage Finance Timber/Commodities Regional Banks Chemicals Homebuilders Building Single-Famil Financials 4 Products Building Electrical & Electrical Components Housing Mechanical y REIT-As Mechanical Land Plays 44 1/4 Household Durables Business Retail Specialty Retail Services Internet Services Home Improvement Real Estate Brokerage Retail Source: J.P. Morgan 3 EFTA01071291 Duhravko Lalcos-Bujas (1-212) 622-3601 Global Equity Strategy and Quantitative Research 13 August 2015 J.P.Morgan dubravko.lakos-hujas@jomorgan.corn A diverse list of industries tied to a recovery in housing. In this report, we identify approximately 100 companies that have direct or indirect exposure to US housing and should benefit from the continued pick-up in residential investment (see Figure 12 - Figure I4 for a full list). As shown below, the housing plays range from direct beneficiaries of housing (such as Homebuilders, Building Products, and Land Plays) to derivative industry plays (e.g., Durables, Retail, Financials, etc). The housing plays that we identified have a combined market cap of $592b and represent 3% of total market. As shown in Figure 5, these companies offer significant sector and industry exposure. Figure 4: Sector Breakdown: Housing Composite Figure 5: Industry Breakdown: Housing Composite WO companies. equal-weighted Median MC* P4 Mt Kyr Pelynan• 44efla I Technology, 2 Miley I Wawa OD n 144 Lei Mee. TIE 1Tr an 1.14344fteCtetes 25 1331 111 1125 lib 01% 45% •53% Say Peak 1 1413 la 3124 24.04 .11,4 41% •1241% Dana SW 1134 Mb let a a 411% VI4ten313, 14 anbeehien' ri.es lilt alb VP VA a a '7% Ronk ;WS 7231 It* 2434 la* 4% 42e4 •14% twee/ 4,1)4 Ilk 1434 1144 -17,4 4% PC% hen 2344 1274 1625 lib 4% 43% ail ,. Tow: too RadElianingan /Cod Re 7244 3134 9134 1% I% Companke pit 1114,2%**Faao 2111 141 Mb It 22.1% 4:1% 41414 Cak033.424114 1331 1234 4/ 34 I* *a 41% •11,4 Pare 4423012243:5 1234 tik 4Th Ha 4% •11,4 •21% Tel% Covreed Deena 3.141 21k 24/4 21* 44% *II% 43% Ens SW lit NA 13.24 41% 45% 42% Industr4I3 24 Mums 60444 SI . ISA Ilk 43% 4,4% 4a 114323444grear 100 11.44 lb Mb *7% al% A% 0442441 3* 2141125 21* Oa 414% II% Pere &Cato WY 3311 1St $34 Kb a .12% 4b: ituatiOnict SR 1St Rh la 41% 431% 4% Source: J.P. Morgan 1.4424*boul. Sassis 4314 110h . lit* a% AS% 4014 5:409 2712 a fl u lib .44,4 .41% OM Source: J.P. Morgan. Blomberg A lost decade for housing equities. Over the last ten years, housing stocks have sharply underperformed the market due to poor demand (low household formation) and excess supply (foreclosure homes). As shown in Figure 6 below, the peak to trough decline for housing stocks was -89% (similar to Nasdaq composite decline). In absolute terms the recovery in housing stocks has been strong (+374% from the bottom vs. +218% for S&P 1500), but it is still 47% below its all-time high in 2005. We believe housing stocks are likely to outperform the market over the next several quarters due to stronger relative growth and cheaper valuation, as discussed in the next section. Figure 6: Performance: Housing Composite vs. S&P 1500 Figure 7: Performance: Annual Performance Indexed to 100 on 1/1)2000. equal-weighted Annual, absolute and relative to S&P 1500 me Absolute Pedormar Housing Composite 442% .52% 41% 01% xe 428% .311% .14% - +1% os WS .4% 293 -1% 49% -17% 200 -50% -51% 150 Relative to S&P 1500 47% nn *X% nn 441% 103 K2% 42% OS ■ Wi% 13% 58P 150 1Mr 50 4% 41% 47% 41% -32% 0 .51% 2000 2001 2002 2003 2001 2005 2006 2007 2006 HOG 2010 2011 2012 201 2311 2015 90 91 '02 TO DO 'C6 '06 17 18 TO 10 11 12 13 14 IS Source:J.P. Morgan. Blomberg Scurce:J.P. Morgan. Blocrnberg EFTA01071292 Duhravko Lakos-Bujas (1-212) 622-3601 Global Equity Strategy and Quantitative Research 13 August 2015 J.P.Morgan dubrayko.lakos-hujas@jomorgan.com Growth at a Reasonable Price? After more than six years into this recovery, we believe there are few opportunities that offer stronger growth and cheaper valuation than housing. After multiple years of undcrperformance, housing stocks trade at a significant discount to the market even with stronger expected growth than rest of the market. • If housing were a unique GICS sector, it would offer the strongest earnings growth and second cheapest valuation. Based on consensus estimates, Housing stocks are expected to grow earnings by roughly 50% over a two-year period — this is stronger than the organic growth sectors (Healthcare and Technology) and the lower oil price beneficiary (Discretionary). As for valuation, the multiples are as depressed as Materials, which is tied to the slowdown in China while housing is largely a domestic play. Figure 8: Valuation: WE (2016) Figure 9: Expected Earnings Growth: 2014-2016 Housing Stocks vs. SAP 1500 Companies Housing Stocks vs. S&P 1500 Companies 35.0a 475% AD% 30.0a *SO% dim 41% 4.y. 437% +a% +31% 2ux alto 422% 25.0a 425% 413% 241.5x IDS 20.0z .0% ish t5b 14.04 %Is lib Mk 111.1% aW 4% 15.0z .25% I 47% lot .50% " 44 Ji nn/ 41 4/ te r st, 41 41 0 ,771"/ iDe Source:J.P. Morgan. Bloomberg Source:J.P. Morgan. Blomberg Improving sentiment implies the sector is no longer toxic. Whether you gauge the sentiment by the Street's analyst ratings or short interest, Housing stocks have seen improvement in sentiment by market participants. Housing stocks have higher short interest as % of float (4.6% current vs. 10-Yr median of 5.0%) compared to rest of the market (3.6% vs. median of 3.4%), see Figure 10. The Street's sentiment has also been improving with average stock rating now similar to rest of the market (Bloomberg Mean Rating: I= Strong Buy, 4= Sell). This implies that the sector is slowly normalizing and less likely to be viewed as toxic by investors and could see continued accumulation. Figure 10: Investor Sentiment: Short Interest as % of Float Figure 11: Street's Sentiment: Average Stock Rating Median Median 1t0% ID -- Hewn; Co-post4 1t0% Homo; Crpost4 red= —saPI500 IS 140% SW 1930 sedan 12.0% 20 10.0% 23 24 25 10% 10% 30 4.0% 35 2.0% Undemerfsesia —SIP 1500 S&P 1500 neap 0.0% 110 117 2 '03 to IS 16 '07 %II 99 10 11 12 13 14 15 DS 111 '02 1.1 '111 t6 -06 117 to TA 10 'II 11 13 14 15 Source: J.P. Morgan. Bloomberg Source. JP. Maslen. BIcemberg 5 EFTA01071293 Quhravko Lalcos-Eujas (1-212)622-3601 Global Equity Strategy and Quantitative Research 13 August 2015 J.P.Morgan dubrayko.lakos-hujas@jornorgan.com Equity Plays Levered to Housing Theme: in the tables below, we identified housing-related stocks levered to a pick-up in residential investment. Figure 12: 100 Ideas Levered to Housing Recovery (continues to next page) Price as of as of 8/12/2015 tawny SW* Ma Nil(%l al Ce901.1 Techrialt WUEillmalt Villoill0.1 524* Am) Te/5.1 51,01 Avg 11$241147~111 54191 EPS EN Cvnrt Ifhph, Mutt Vol 124,c4 Prat is % et ASI I=441 Stck LOA Grate. 0.4411 MITOA PIE PC, GCS 54cte1.6..8) 0:«59, ) IF1.11.1>AX,90~51:n TOW P6P) 10.4 Cep Owl Crone VTO 141019 7~1 OM* Oil 34087 5•1.4 %ItiCt NW N111 LIM NW Pal YNN nIZZCZTIONI S" W' Wa" Aks — — $3.178 $31.0 9% 0% —— 10% 3% ID 31 14% 5% it% 1234 172a 24z 5% Chenkit Industry. C44.44414 — — 53317 5193 - -3% -7% —— 10% 2% 44 31 10% 4% 15% at 1St 334 4% I aentn.‘14a-r8 Corer/ BuiOng/449P34 S1413 $273.17 290242 525262 51761 31% 3% N Jellog1 Zakaustzt 4% 2% 48 39 69% 1% a% 17.38 222* 334x 4% 2 WesItCroncåC<t3tacr, 1140rp *rat 11L1( 92.93 9553 $8368 5511 .79% 1% OR Jellotlataalze 26% 1% 43 33 IA% 0% .10% Ilk lax 261 4% 3 Vabou CAwalAi 1340r0 409,04 WA 8336 91172 56482 5105 7% -7% N JertJaVanN4 10% 5% 45 3.6 54% 6% 13% 1138 154x 754 6% 4 RP1.11.41~.1Ix. &tarp *rat RPM 515.03 52,03 56398 DU 6% 4% N Jellotlataalze .4% 3% 44 4.1 04% 9% 10% 1328 1714 4.b 6% s satoket*ooconterromeaciformbfor, WO 561.61 8953 51.039 $18.4 23% 5% ON at.) allanU4 8% 2% 61 34 — 4% 12% 1158 16.9x 5.8« — 8 Pc150ne ~alp, &tarp Ltienit POL 33151 41,32 usei sa2 .iis .os 5% a 4A 62% 1% 11% 142* lilt 3.74 3% 7 44.51Cators»n 13.40r0 409,64 MS 12103 5875 52907 $25.7 -34% 43% N Mkt J 201441.16 0% 3% 35 34 — — — 104x 14.8« 0.8« 5% 8 lens 9.5r114.4e. Pc &40rq/44enit /290 $7.95 la $937 513 .47% 40% 3% 26 30 — 3% 72% 1028 831 1.2* — Contlivellontlawitlx Indt$113: 6~ 1~ ItIn 1 — — 47906 $130 46% 43% —— — 2% 10 42 1.4% 18% 119% 1144 233i 354 2% 9 Nall 144-414144en14 Irc Burdlil /Alt/at 1.4.11 517211 1/3,103 $11457 $1432 35% 55% 6% 01 3.9 09% 19% 81% 1638 252* 2/4 3% 10 DP War" bc. EkidrulAiltr“ DP $5391 10964 44.154 SE6 9 -9% 8% 2% 55 4.1 — 18% 33% 14.38 1B lx It — II ItellAfllS FOXPOZIas, &Id Mittat NW 521.19 all $1.545 $120 93% 40% -.. 2% 61 44 — II% 212% 1238 214 14.14 — Pea å ~I Products lipluary: F444111Foreu Produces — — $1.110 68.4 0% -14% —— — 2% 44 34 4.4% 1% 16% 928 121la 24z 7% 12 10.4~1..494tCOrtenton &ilk.) Willa LP% 516.39 1902 52317 SO 7 20% -2% 16% 50 2.7 0.0% 14% -b. NA 6364 22« 4% 13 SpieCascra C4 KildtgDahlia BCC 131.35 4421 $1260 $130 13% -14% 3% 41 4.7 05% 9% 3% 828 1551 2.44 1% 14 Piic int. CP40(9134 Tints DEL 81.37 70110 $517 523 6% 4% 3% 44 — — — — 2198 Nit St — — Er=lillieleS 441011 ~nib — — 1.2744 $224 5% 4% — 1% 3% 411 3.4 23% 4% 11% 11.14 16.48 Lk I% Atrotpue 4 Oanst lodusty: ~044~8 Wait — — 56112 $111 14% 4% — 13% 3% 411 41 3.4% 3% IS 1128 1St az 1% 15 lailllllPt«)Irtlult/411,Ille KM/WM 01/nil NM( RIJN at 5557 118 25% as 6% 61 — — — — 554 NA 164 — IttIllif.2 PttGuCls 14dutirp: Butlag Products — — $1411 $73 42% a% —— 6% 3% 57 4.4 a% 12% 31% 13.36 2124 4.04 4% 16 IlllE0Cl(Walln SUWON:4i% MS 527.03 27117 $9321 51661 48% 22% OW late«lithut CFA 14% 3% 65 39 35% -9% 19% 1128 20 24 NA 6% I? icetne Bert Hunt & Scarp. &MfgPrecits AVIS $4311 5037 $7.947 5612 31% 10% N WindNan CPA 4% 4% 61 3.9 23% 17% 77% lea 21.3« 3. 3% 18 414001PIC Boks-08»ctiza 6 kwae•tel +/LE 933.07 604 56051 $109 23% 14% 1% 55 42 04% 4% 20% 174x 19741279* 4% 19 LeIllail blill.knilht. Outrp Elen”.$ 4 MeCINTC41 LI flald 12773 $5.438 $54A 42% 21% C« C.Sthen rut RCM -17% 4% 67 40 93% 6% 31% 14/18 2350, 9414 4% 20 A O. So*C01:010” IN.46-06»dics8M.0~.41 WS WM 77/45 35301 $335 50% 24% 2% 50 40 1.7% 12% 26% 1574 20Ax 4.3x 4% 21 Oa* Corn% 13.3rpPrecits oe 54342 47.21 u.a4 5714 32% 26% N WindNam CPA 6% 3% 58 3.7 09% 9% 18% 948 17.51 It 3% 22 MG 0110(8511 B415, 0N4A U50 531.70 32•25 54.833 3513 20% 14% N ~RS« CM 3% 3% 66 3.4 02% 8% 29% IAN 1634 9.7S 5% 21 AmairoWy111rdusres.Irc &Mr° Proclact AW 95751 Wu 53.179 5390 18% 12% N MeadNan CPA 1% 8% 56 34 (IX& 2% I% 11.5« 223 4.2* 1% 24 Weexi8Pwrelone10,44 BL03,0~<6 DOOR 565.33 7342 32025 $150 13% 9% 6% 46 43 - - - 193* 31.1. Us - 25 Camp/Six.* ScelYa8L11. BuNrgPecan CM $53.46 12(45 MD 511.7 24% .10% CM lAdnelFan CPA 30% 3% 18 43 OA% 18% 15% IA« lilt 59, 0% 26 troc.nMertlearin, CO. Pt 61818,01.85811$ 550 1)566 3921 $1.774 185 19% 4% 3% 57 33 - 7% 18% 1128 24.4 20x - 2? &Men FrpSo.rce.irc Bul3rpPrccbct 41.1X% $14.18 BPS 51.572 $12 144% III% 5% 59 40 0.1% 12% 119% 2938 29.114 299* 0% a 7,9.. Cwt.' y. Irc 6j1:1,0Pttla TREX 541.32 5531 $1.316 $121 48% -2% 9% 41 3.4 02% 12% 21% 1698 21.54 Btx 4% a UluntiFat, PIMIalS. lx. &MNPrecixt OPPI 93261 8041 51.267 14.7 44% 18% 3% 6) 43 OA% 10% 22% 9.18 1St It 5% 30 Ars~xlm"Cososio, &ofreNadi NSW 56117 8143 $1.039 58.7 117% 58% 3% 6. 42 05% 15% 32% 94 23.04 4.5. 3% 31 Pry Gan1631,43.It &MNPrecim PGD4 514.03 ILI $957 326 49% 1% N SWIM Attu; C74 7% 3% 58 43 OA% le% 915% lax 1534 NA 4% 32 011.:nCnionbn 8dIfripx<14$ OFF 517.22 1011 MI RA 61% 30% 7% 56 35 8.7% 2% 48% 9.74 165* 1.0x 4% Becklcal E~al Sultry: IIKIrltd Equipment - - gra $11.3 41% 4% - - 1% 42 3.4 21% 0% it% 13.94 1134 211. 1% 8 C.~Ill 01114Corpowi:n Boks-gEbusw&Mxtetsi BCC 1,6.18 22511 $789 3130 _ -27% 8% 8% 42 33 - - - 332, 129* 234 - Source: J.P. Morgan. Blomberg 6 EFTA01071294 Dubravko Lakos-Bujas (1-212)622-3601 Global Equity Strategy and Quantitative Research 13 August 2015 J.P.Morgan dubrayko.lakos-bujas@jomorgan.com Figure 13: 100 Ideas Levered to Housing Recovery (continues to next page) Price as of as of gi12(2015 CagnY Stab Price PalN JP11Coverag9 Teclnkb NES Estimates Verbs 52 Mg ragM Slot AvgRegRaparchasa Sac En EN O07011 Ill. 4.30481 WI 124nel Rbe 88 %O RS I • 50 51461114 000 0400 193r11)11 RE PCP tC *tte?0Al tnce, 1PMW.6np Omaitakn TO4r R14/4 Los cap (nn) Chem]. vii, limn' 44,144$1 14.034, Gal 3Way 5.19,4 %Warp NW NT11 LTM NTY AB YNY sate.: Baton* - - 42175 $30.5 9% 0% ... - - 10% 3% 13 35 14% 5% 11%...1284 1724 Lid 5% IlacItinory pato": Nacilinity - - sues 5224 -4% -10% - - 0% 4% 45 3.7 31% 1% 11.46 $6146 VA