James Hardie - What happens when the Fed cuts ratesJames Hardie (NYSE: JHX) is one of the cleanest cyclical plays on a U.S. housing rebound. The majority of its earnings come from North America, making it highly sensitive to changes in U.S. construction and renovation activity.
U.S. housing is cyclical. It contracts with high interest rates and rebounds when rates fall. The Federal Reserve is widely expected to start cutting rates over the next few quarters. That sets the stage for a recovery in housing demand. JHX is positioned to benefit directly.
This isn’t Hardie’s first cycle. The company has survived and thrived through decades of housing booms and busts. Around two-thirds of its U.S. profits come from the repair and remodel segment, which tends to be more stable than new construction. With much of the U.S. housing stock over 40 years old, renovation demand remains strong.
JHX recently announced an $8.75 billion acquisition of Azek, expanding into wood-alternative decking and railing products. This strengthens its U.S. footprint and product mix, while positioning the company for scale and synergy.
Meanwhile, Warren Buffett has been quietly buying U.S. homebuilders, including D.R. Horton and Lennar. That’s a clear vote of confidence in the long-term value of the sector.
JHX shares are down more than 30% from recent highs, pricing in short-term weakness. But this is a classic cyclical setup. When housing turns, and it always does, Hardie will be a major beneficiary. The market will move well before the recovery shows up in the numbers.
Now is the time to look forward.
The forecasts provided herein are intended for informational purposes only and should not be construed as guarantees of future performance. This is an example only to enhance a consumer's understanding of the strategy being described above and is not to be taken as Blueberry Markets providing personal advice.
