Where Should HVAC Technicians Wisely Invest Their Money?

Where Should HVAC Techs Invest

Blue-collar workers like HVAC technicians may not be the first people you would think of as savvy stock market investors. As a company owner, I provide our workers with a Simple IRA that acts much like a 401K. We match a certain percentage of their contribution to their retirement account. In that account, they are encouraged to invest their money in a variety of stocks or ETF’s.  These options can help them gain some free money in the form of capital gains.  The stock market has, on average, provided more interest than leaving an employee’s money sitting in their account, gaining no interest — not even the 1% to 3% a traditional bank would generate for their customers.

Buying Shares in Familiar Companies

Warren Buffet, Benjamin Graham, and Peter Lynch are some of the greatest investors of all time. Their advice when it comes to investing is to invest in what you know.  Should HVAC technicians focus on investing in banks and biotechnology? Probably not. But a technician would have great insider information on the HVAC industry. Lennox, Carrier, Daiken, Johnson Controls, Honeywell, AAON, Comfort Systems, Watsco, Mitsubishi Electric, and Fujitsu are all very popular names in our industry.

HVAC Equipment Shortages

The pulse of the industry is like second nature to HVAC technicians.  As I write this at the end of a very busy summer and hopefully near the end of the COVID-19 crisis, insiders know there is an unprecedented and vast shortage of HVAC equipment and parts.  Raw materials, control boards, compressors, switches, copper, aluminum, sheet metal, and everything else that goes into an air conditioner or furnace are slow in getting to manufacturers. 

Companies like Lennox, Carrier, Ruud, Goodman, among others, are being delayed.  Some delays are not necessarily due to temporarily closed factories, worker layoffs, or everything else COVID-19 has brought with it.  Snags in transportation or the receiving docks receiving those deliveries also affect the process.  Delays persist.

How do all these factors affect stock prices now? How will they affect stock prices moving forward into 2021 and 2022? And how is the industry growing in general? These are questions HVAC technicians and other industry experts are much more likely to know the answers to than biotech experts. Therefore, it’s important we blue-collar experts invest in what we know. Should we be investing in pharma stocks that might create the vaccine for the COVID virus?  Not if the only thing we know about it is what we’ve seen on TV.

HVAC Market Demand in 2021

Commercial and industrial HVAC companies can tell you that 2020 saw a significant slowdown in certain sectors of the buildings where they service and replace equipment. Data centers, health care, and warehouses remained a reliable source of work. But retail stores, hospitality, and restaurants suddenly became incredibly soft markets. All the major HVAC manufacturers like Watsco, Johnson Controls, Carrier, and Lennox expected the softness now seen in the light commercial segment. It will create some pent-up demand going into 2021. That is good for earnings for these publicly traded companies, and who better to gain from it than our own industry experts?

COVID-19 is Inspiring Home Improvements

In an earlier post last month, I discussed what happened to those of us in the residential HVAC market. There’s been a demand for equipment changeouts, unlike anything we have seen. What was happening? Those workers directed to work from home started investing in their homes. Hardware stores, gardeners, construction crews, and HVAC companies all started working harder than ever before! I cannot think of one contractor I have talked to that did not smash sales records this past summer.

The Working From Home Trend

Homeowners found they had more disposable income to work on their homes since vacationing and going out to the movies was not going to be happening anytime soon. When offices begin opening again, the commercial sector will see a rise in sales. That is good for stock owners. I think a little over half of those working from home will remain working from home. And they will continue sprucing up their homes to ensure a comfortable workspace. But we as HVAC technicians already know that. Therefore, investing our hard-earned retirement money in something we know follows the advice of a few of the greatest investors of all time:  investing in what we know.

Getting Started

Give it a shot! You don’t have to be a super slick Wall Street investor to be invited to the party. Apps on your phone will let you buy shares of stock one at a time. I personally have my IRA and another account on Robinhood, which takes no extra fees for me to invest my money through them. If I only have a hundred dollars to throw into my account that week, I can purchase $100 of a $275 share of Lennox. It all builds up over time, and the younger you start, the sooner you will have enough money in your retirement fund to support you when your knees finally go out.

Invest in Companies You Know

Instead of letting your money sit in an account making no money beyond what you put in there, invest in some of these companies, companies you already know well enough to know that they make good profits every year. This industry will only increase in size every year due to technology upgrades, population growth, and new homes being built further out into suburbia, to name a few.

Thanks so much for stopping by and we’ll see you on the next blog.

HVAC Equipment Shortages Due To COVID-19 Pandemic Create Chaos

HVAC equipment shortage

There’s a significant shortage of HVAC equipment needed to replace our customers’ current systems.  In some areas, if you were to sell a new system to a family, there’s a chance that order with your distributor can’t be completely fulfilled.  And I’m going to talk about why.

Nobody thought in March or April of 2020 when we were all sitting at home following Stay At Home orders that our industry, primarily residential HVAC, would see a 30% to 60% uptick in business through the summer months of 2020.

May, June and July were months that our company, as well as almost every other contractor I’ve talked to, saw record sales, especially in the equipment replacement area.  I’ve talked to some contractors in other parts of the country that haven’t seen this increase in sales, but it’s been few and far between.

To get some answers as to why this shortage has occurred, I asked a couple of industry professionals in my area to give me their thoughts.  I wanted to know what other contractors are doing about it, and when we can expect our warehouses to get back to normal levels of equipment inventory.

Why has the HVAC Equipment Shortage Occurred?

COVID-19 affected all manufacturers in one way or another.  Some manufacturers were hit earlier than others due to outbreaks in their facilities, forcing them to abide by CDC regulations and shut down for two weeks at a time.  It slowed down production to a near halt.

One industry professional told me, “Everyone felt the effects when the raw materials used to build our equipment became unavailable.  Theses included things like control boards from India, motors, and controls from China, raw steel, raw aluminum, and copper from various parts of the world.”

“When something like COVID interrupts any part of the supply chain system, including how those parts get shipped from there to here, and the number of employees working in these factories, the only thing to expect is chaos. We’re experiencing a weird dynamic right now with worldwide stress, but also with a high demand for our products and services.  The scenario is creating an almost panic for our industry to perform.”

What Are Contractors Doing Since Their Equipment Isn’t Available?

HVAC contractors, large and small, whose usual brand of equipment ran out, were forced to go to other stores and find anything they could get their hands on.  That created an even higher demand for equipment from our local suppliers.  So, while the sales were good for them, almost every supplier felt the squeeze, eventually getting to the point where they were out of product, which usually lasts a lot longer.

Another industry professional told me, “At first it seemed like a lot of contractors became extremely frustrated with the lack of inventory, especially since a lot of the jobs were already sold and they needed the equipment quickly.  But as time went on and EVERY supply house was having the same issue, it became apparent to us contractors that it wasn’t because these supply houses weren’t watching their inventory close enough, and restocking accordingly.  It was a bigger problem all around.”

When Will Things Get Back to Normal?

Equipment manufacturers are not and can not give us ETAs as to when equipment will be back to normal levels.  The demand for products and services in this area has outpaced the manufacturer’s ability to build, produce, and ship out inventory.

Some manufacturers are saying October, but that would be if no new setbacks occur from closures caused by another increase in COVID cases.  And in a time where new issues seem to arise from this pandemic every week, and with no dependable vaccine ready to go by the end of 2020, it’s tough to tell when the HVAC equipment shortage will end.

Fortunately, in California, we’re getting close to the end of the hottest time of the year, so local suppliers should have an easier time restocking their shelves as demand goes down.  Winter months are relatively mild around the Sacramento Valley, so we won’t get that high intensity of equipment change-outs experienced in other areas of the world with longer, colder winters.

Stay safe and follow CDC guidelines so we can get through this sooner than later.

Thanks so much for stopping by, and we’ll see you next time.

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