Key Takeaways

• Despite challenges in the housing sector, there remains a strong demand for plumbers for home repair and remodeling
• Tech advancements like smart toilets are reshaping plumbing and offering opportunities to home improvement retailers
• Consumer demand for sustainable home solutions is still increasing
• Material shortages in the construction industry are affecting the plumbing sector
• Given the industry’s extensive training and apprenticeship programs, companies with strong employee retention strategies will have a competitive edge
• Environmental concerns are driving a focus on reducing water usage in plumbing

Plumbing Industry Stock Picks

• FERG – Ferguson plc
• MAS – Masco Corporation
• AOS – A. O. Smith Corporation
• HD – Home Depot
• FSV – FirstService Corporation

Let’s see why each of these picks could benefit your portfolio.

Ferguson plc (FERG)

Ferguson plc (formerly Wolseley plc) is a British-American multinational plumbing and heating products distributor. The company is headquartered in Wokingham, England, and its brands include Ferguson Enterprises in the United States. Ferguson plc changed its name from Wolseley plc in March 2017 to reflect its primary operations in the United States.

Ferguson plc has a strong presence in the plumbing market. As a leading distributor of plumbing and heating products, Ferguson plc benefits from the demand for these essential products in the construction and maintenance industries. The company’s extensive network of branches in the United States, Canada, and central Europe allows it to serve customers and provide a wide range of products efficiently.

Investment Opportunities

Investors can gain exposure to the plumbing market and benefit from the company’s strong position in the industry.

As a multinational distributor, Ferguson plc is well-positioned to capitalize on the growing demand for plumbing and heating products in the residential and commercial sectors.

Additionally, the company’s revenue and net income figures demonstrate its financial stability and potential for long-term growth.

Masco Corporation (MAS)

Masco Corporation is a Fortune 500 American manufacturer of products for the home improvement and new home construction markets. With over 20 subsidiary companies, Masco operates numerous manufacturing facilities in the United States and other parts of the world. The company has a long history, dating to its founding in 1929.

Masco has experienced significant growth under the leadership of Richard Manoogian, joining the list of the largest U.S. corporations. The company’s success can be attributed to its expansion through acquisitions. Between 1997 and 2002, Masco acquired 42 companies, totaling $10 billion.

Investment Opportunities

Masco offers a range of well-known brands in the plumbing market, including Delta Faucet Company, Peerless, Brizo, and Kraus. These brands cater to different market segments, from economy to mainstream and luxury. Masco’s expertise in plumbing products, especially faucets, has been instrumental in capturing the mass market and expanding its sales from plumbing wholesalers to retail stores.

Their extensive manufacturing facilities enable efficient production and distribution of its plumbing products. Its growth history positions it as a leading home improvement manufacturer, which could lead to an investment opportunity.

A.O. Smith Corporation (AOS)

A. O. Smith Corporation is a leading American residential and commercial water heaters and boilers manufacturer. With its headquarters in Milwaukee, Wisconsin, the company operates globally and has 24 locations worldwide, including manufacturing facilities in North America, India, China, and the Netherlands.

A. O. Smith is North America’s largest manufacturer and marketer of water heaters and supplies water treatment products in the Asian market. The company has a strong presence in the plumbing industry, offering a wide range of water heating solutions for residential and commercial use, including gas and propane, hybrid, electric, tankless, and solar water heaters. They manufacture boilers, storage tanks, skid systems, and pump and expansion tank accessories.

Investment Opportunities

Investing in A. O. Smith’s stock can benefit consumers in the plumbing market due to the company’s dominant position in the water heating industry. As North America’s largest water heaters manufacturer, A. O. Smith benefits from its established brand reputation, extensive distribution network, and broad product portfolio. This market leadership allows the company to capitalize on the growing demand for efficient and reliable water heating solutions.

Moreover, A. O. Smith’s global presence and diverse product offerings provide stability and potential for growth. The company’s expansion into international markets, such as India and China, positions it to benefit from the increasing demand for water heaters in these regions. Additionally, their focus on innovation and technological advancements ensures they stay at the forefront of the industry, offering energy-efficient and environmentally friendly solutions.

Home Depot (HD)

A common household name, Home Depot, is the largest home improvement retailer in the United States, offering a wide range of products and services related to tools, construction, appliances, and more. With over 2,300 stores across the United States, Canada, and Mexico, The Home Depot serves consumers and professionals in the plumbing market.

Investment Opportunities

Owning stock in The Home Depot can benefit consumers in the plumbing market for several reasons. Firstly, the company’s dominant market position gives it significant purchasing power, allowing it to negotiate favorable deals with suppliers and offer competitive prices to customers. This means consumers can benefit from cost savings when purchasing plumbing products and supplies from The Home Depot.

Secondly, Home Depot’s extensive store network and online presence provide convenient access to various plumbing products. Whether consumers need pipes, fittings, fixtures, or tools, they can find what they need at their nearest Home Depot location or through the company’s online platform. The availability and accessibility of these products make it easier for consumers to complete their plumbing projects efficiently.

Home Depot aims to enhance the customer experience and make plumbing projects more accessible and manageable for consumers.

FirstService Corporation (FSV)

FirstService Corporation is a Canadian real estate services company based in Toronto, Ontario. It specializes in residential property services and is publicly traded on the NASDAQ and the Toronto Stock Exchange. Founded in 1989 by Jay S. Hennick, the company has grown through acquisitions and expansions into various residential service franchises.

FirstService is divided into two segments: FirstService Residential and FirstService Brands. FirstService Residential, responsible for 69% of its 2017 revenue, provides property management services to private residential communities such as condominiums and homeowner associations. It manages approximately 8,000 communities in Canada and the United States. Some notable buildings managed by FirstService include

• The Union in New Haven, Connecticut
• ViewPoint in Atlanta, Georgia
• Morningside Gardens in New York City
• Ideal Lofts in Toronto, Ontario.

In 2019 they also acquired FirstOnsite, a property reconstruction service.

FirstService Brands operates six franchise networks that primarily serve residential customers. These networks include Paul Davis Restoration, CertaPro Painters, California Closets, Pillar to Post Home Inspectors, Floor Coverings International, and College Pro Painters. With a total of 1,935 franchises, FirstService Brands plays a significant role in the residential service market.

Investment Opportunities

By owning FirstService stock, investors can potentially benefit from the company’s stable revenue streams, diversified business segments, and established market presence. Additionally, FirstService’s focus on residential property services aligns with the plumbing market, as plumbing systems are essential to residential properties.

As the company continues to expand and strengthen its position in the real estate services industry, investors can potentially capitalize on the growth opportunities in the plumbing market and beyond.

Plumbing Demand Amidst Housing Instability

The plumbing industry in the United States was valued at approximately $134 billion in 2022, with around 130,300 businesses participating in the market. (1)

In 2020, there were about 469,900 plumbers, pipefitters, and steamfitters in the United States. While the industry has seen steady growth, it was still projected to experience a decline due to a flattening housing market and elevated building material costs. (2)

Technological advancements are driving changes in the plumbing sector with the rise of smart technology and digital advancements.

Additionally, there is a growing demand for eco-friendly plumbing options as the industry seeks to address environmental concerns.

However, the industry faces workforce challenges, with a shortage of skilled plumbers and difficulties attracting younger demographics to the trade. These challenges, along with the slowdown in industry growth due to higher mortgage rates and slower residential construction, are expected to impact the revenue of the plumbing industry.

Despite these challenges, there remains a strong demand for plumbers in the home repair and remodeling sector. To capitalize on this industry trend, plumbing professionals need to adapt to emerging product options and smart home systems, while efforts are needed to generate interest in the plumbing profession among eligible participants in the workforce. (4,5)

Technological Advancement Trends

Technological advancements are playing a significant role in shaping the plumbing industry. The increasing adoption of smart technology, such as smart toilets3, motion-sensor faucets, and leak detectors, is catering to the evolving demands of consumers. These smart-systems offer enhanced functionality, convenience, and efficiency.

They allow homeowners to monitor and control their plumbing fixtures and systems remotely. The integration of digital innovations in plumbing not only improves the overall user experience but also enables better water conservation and energy efficiency.

For instance, smart toilets feature automated flushing and adjustable water flow, reducing water consumption. Motion-sensor faucets provide touchless operation, promoting hygiene and reducing water waste. Leak detectors have sensors that detect leaks and send alerts, helping homeowners prevent water damage and save on costly repairs.

As technology advances, the plumbing industry will need to stay abreast of these developments and adapt to meet the changing needs of consumers.

Sustainable Solution Trends

Sustainable solutions are increasingly sought in the plumbing sector, with a growing demand for eco-friendly plumbing fixtures and systems such as tankless water heaters, greywater recycling systems, and solar water heaters.

Water conservation is a key focus, as these systems help reduce water waste and promote efficient usage.

• Tankless water heaters are popular due to their ability to heat water on demand, eliminating the need for a storage tank and reducing energy consumption.
• Greywater recycling systems allow water reuse from sources such as showers and sinks for irrigation purposes, reducing the reliance on freshwater sources.
• Solar water heaters harness renewable energy from the sun to heat water, reducing reliance on traditional energy sources.

These sustainable solutions benefit the environment and help homeowners save on water and energy costs.

Workforce Challenges

One significant challenge the plumbing sector faces is the availability and recruitment of skilled labor. With the current labor shortage and an aging workforce, attracting talented individuals to the plumbing industry has become a pressing concern.

Plumbing companies increasingly focus on developing and implementing effective training programs to address this challenge. These programs aim to provide aspiring plumbers with the necessary skills and knowledge to succeed in the trade. Plumbing companies can attract and retain skilled individuals by offering comprehensive training opportunities, ensuring a steady supply of qualified workers.

Additionally, efforts are being made to generate interest in the plumbing profession among eligible participants in the workforce. This includes promoting the benefits and opportunities available in the industry, such as job stability and potential for career growth.

Wrap Up

Despite the challenges of the housing and plumbing workforce, plumbers and all the materials they use are projected to be in demand. With all the technological advancements, you will need a professional for those who choose a DIFM (do it for me) or the DIY route.

As a savvy investor, you can use these trends to your advantage when researching the best options for your portfolio.

If you’re looking for one-on-one style mentorship, contact us to support your trading journey.

Article Sources

1. https://www.ibisworld.com/united-states/market-research-reports/plumbers-industry/
2. https://www.bls.gov/ooh/construction-and-extraction/plumbers-pipefitters-and-steamfitters.htm
3. https://www.marketresearchfuture.com/reports/smart-toilet-market-5720
4. https://www.thefarnsworthgroup.com/blog/repair-remodel-demand
5. https://www.globenewswire.com/en/news-release/2023/03/08/2622766/0/en/Plumbing-Fixtures-and-Fittings-Market-is-Expected-to-Reach-USD-170-69-Billion-by-2030-at-a-growth-rate-of-5-88-Report-by-Market-Research-Future-MRFR.html

Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.