The best savings and mortgage stocks to invest in right now

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The savings industry has been plagued by headwinds in recent years. Interest rates remain historically low and continue to hamper the mortgage market’s ability to grow, but several difficult macroeconomic factors have dampened activity. For example, tighter loan requirements, higher home prices and stagnant wages have made financing difficult for many potential homeowners.

In addition, investors are reluctant to refinance companies that are once again in the housing business, given the fallout from the housing bubble of a decade ago. Instead of capitulating to these challenges, savvy investors see an opportunity in this downtrodden market. The United States still needs investors willing to support its growing demand for housing at reasonable prices and terms, especially small-scale private equity funds and venture capitalists who can see the value small businesses that meet these needs.

WSFS Financial (WSFS)

WSFS Financial is one of the largest savings companies in the United States. Its business model has remained relatively intact since its inception in 1872 as a savings and loan company. The company has earned a sizable deposit base of around $20 billion, with most of its customers in New Jersey, Delaware and Pennsylvania. WSFS uses deposits to finance real estate development and home purchases while offering mortgage products and cash advances to merchants. The company has grown its loan portfolio aggressively in recent years, expanding into commercial and residential mortgages. WSFS has also benefited from a recovering stock market, as most of its shareholders are institutions.

MSC Industrial Direct Company (MSM)

MSM’s business model has remained relatively unchanged since its inception in 1990 as a distributor of industrial supplies and equipment. It operates a network of warehouses and a fleet of trucks to deliver goods to customers. The Company’s customers are primarily manufacturers and dealers of goods such as tools, electrical products and light industrial equipment. MSM has experienced significant growth throughout the business cycle in recent years. The company’s revenue grew 9% year over year in the second quarter and posted a healthy operating margin of 22.2%. The company also has a healthy balance sheet with just $0.5 billion in debt. MSM’s investors include the Carlyle Group and Japanese company Sozo Ventures. Carlyle, the world’s largest private equity firm, has a few housing-related investments, such as Brookfield Residential and WP Construction. The Carlyle Group also invests significantly in MSC competitor Werner Corporation.

Univar Solutions (UNVR)

Univar is a distributor of chemicals and other industrial materials. It primarily serves agricultural, food, beverage and pharmaceutical manufacturers. The company grew significantly in the 1990s when it acquired several chemical supply companies from DuPont and Monsanto. As a result, UNVR saw its revenue increase 10% year over year and its operating margin increase to 20.4% in the last quarter. Its gross margins have also increased enormously, reaching 93% in the second quarter. The company’s healthy liquidity and low level of debt also allowed it to return a significant amount of capital to shareholders through buyouts and dividends.

SiteOne Landscape Provision (SITE)

SiteOne is a distributor of landscaping supplies and equipment for residential and commercial customers. The company primarily serves property owners who wish to have their landscaping and construction companies work on commercial projects (eg, hotels, office buildings, etc.). SiteOne has been a consistent dividend payer since 2005, although its payout ratio has recently fallen in poor financial performance. SiteOne’s sales have grown modestly in recent years, while its operating margin has fallen. SiteOne has a strong relationship with Amazon, which allows it to reach customers who prefer to buy supplies online. He also has a strategic relationship with Home Depot, which bought the company in 2010.

Conclusion

The housing market is currently experiencing a resurgence in activity and prices. However, this cyclical industry has always been difficult for investors to navigate. If you’re willing to take risks in exchange for the potential for outsized gains, the savings and mortgage financing sectors are good places to look. They have been negatively impacted by lower interest rates, but should rebound as rates normalize over the longer term.

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