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. Trane, 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 Trane, 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, Trane, 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.
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.