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Monday, 03/22/2004

Building Blocks
By Nich Sheldon
MAS - Masco Corporation

Company Description

Headquartered in Taylor, Michigan, Masco Corporation is one of the world's leading manufacturers of home improvement and building products as well as a leading provider of services that include the installation of insulation and other building products.

[Source: Company Press Release]

Reasons to Invest:

This week's Drip of the week knows the ins and outs of home improvement, as the company manufactures and sales home improvement and building products. Masco Corporation (NYSE:MAS) announced on Thursday that they were raising their first-quarter profit forecast from $0.36-$0.38 a share to $0.42-$0.44 a share. The company cited better than expected operating earnings as well as increased sales.

In the same announcement the company declared a quarterly dividend of $0.16 a share, which is payable on May 10th, 2004 to shareholders on record April 9th. Masco's annual dividend of $0.64 per share, tallies out to an annual yield of 2.14%.

On top of that the company noted in February that 2003 was a record year for them. They earned a record $10.9 billion in 2003 which is more than half of 2002's $9.1 billion. Furthermore, the company is projecting 2004 to be even better than 2003, based upon their current market trends.

On Thursday March 18th, 2004 MAS hit it's 52-week high of 30.08, which calculates out to a 52-week change percentage of 54.19%. The stock trades on a quarter-million volume on average, and has been following along a solid regression channel, which formulated last March (03).

Masco leads all of its competitors in market cap, revenue growth, revenue, gross margin, operating margins, and net income. One could say that it takes money to make money, but I would rather say that Masco is the building blocks of a better home and that's why they lead the pack.

My only real concern for the long term outlook for MAS is the fact that it's all time high of 33.68 set on September 15th, 1999 is only 3+ points away.

However, I firmly believe that the strength in the current market trend in the housing sector should carry MAS over this psychological overhead resistance. Should we see a new all-time high set in the coming month (or so), there is no telling where the hypothetical glass ceiling is for this housing supplier.

On a more positive note, Masco has yet to close below its March 03 regression channel since April 1st, 2003. Moreover, MAS broke over the middle bar of that channel in the last three sessions, which could be a sign of strength for its upward momentum, as well as support for higher highs.

The MACD indicator has been on a strong buy signal since the middle of February. The Stochastics indicator is currently noting MAS in overbought territory, but looks to be making a move back to the neutral side.

A quick look at the weekly chart and it seems to me that a fresh buy signal is taking shape as the simple 10-DMA has just popped over the 20-DMA after a few weeks of consolidation. Usually when the 10-DMA is over the 20-DMA the stock is headed for higher grounds as it also works the other way around. When your 20-day moving average is overtop the 10-day moving average that is generally a sell signal. You can practically see this trend with any stock that you are researching (I have noted this in previous articles).

According to Reuters, Masco is ranked in the top 15% of its industry (over the past 4 weeks) in regards to price performance. They have a no risk rating on new entries in the stock. MAS has a dividend percentage growth rate of 6.17 percent over the next five years, and a sales percentage growth rate of 15.68 percent over the next five years.

A quick look at Masco's PnF chart and I note the company in a double top breakout pattern, with a preliminary price objective of 57.50. If this objective were hit, I would not be to unsatisfied with a profit of nearly 30 point (that's close to double our entry if we purchased our Drip before market open on Monday).

If I could get a retest of the 28.40-28.50 range, I would put the call in to my broker for a share of this stock, and then call their agent to initiate the DRIP. For a minimum of $50 a month, I have no problem throwing risk capital into a $30 stock. However, I would be happier investing $500-$1000 a month, since my price objective for the stock is close to double its current premium.

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Until Next Week,
Nich Sheldon
Editor

Broker Recommendations

Strong Buy         4
Buy                2
Hold               6
Sell               0
Strong Sell        0

Brokers Covering  12


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: no
Temper Enrollment: Yes

Min/Max Investment = $50-$5,000/month


Reinvestment Fees - 
Dividend investment fees: 0
Cash investment fees: 0
Auto reinvestment fees: N/A


Transfer Agent:
Bank of New York
800-524-4458


Corporate Headquarters:
21001 Van Born Road
Taylor, MI 48180
Phone: (313) 274-7400
Fax: (734) 374-6136



 
 

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