Air conditioner stocks

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ThisJustIn
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Air conditioner stocks

Post by ThisJustIn »

I know, I know, I'm a 3-fund portfolio holder, too, with small-cap value tilt (and I have a tilt on a couple of tech stocks due to RSUs of companies I worked for, which is treating me well).

So, based on the info above, please take a break from Bogle-"heads" (which I'm one of), and think outside a little bit.

Air conditioning will cherish. I checked a couple of companies (IR, TT) and they are impacted by quarantine. But, given that everybody is staying at home and working from home, my guess is there will be a lot of AC buying going on next few months. (And yes, I'm of course not the only one who have thought of this, and maybe market priced this in, but please listen on.)

I understand the risks of single stock purchases, or timing the market. I know, I very well know, that is why I follow Bogleheads philosophy and 3-fund portfolio. But, I have some play money to use in this experiment. It is an amount that I'm ok with losing, a very very small amount.

In the light of this, I was checking AC-only companies (not overall-electronics who also have ACs on the side). I found IR and TT. Do you have any other suggestions for AC companies?
Triple digit golfer
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Re: Air conditioner stocks

Post by Triple digit golfer »

Why do you think that nobody else knows the same things that you know? People use more air conditioning every summer. Do you see an increased performance in those stocks relative to the market every summer?

Are you also going to buy stock in companies like Coca Cola and Pepsi, who sell bottled water? People sweat more in summer and will consume more water.

Don't you think this information is priced into the stock price already?

Unfortunately it is not as simple as, "People are home more, it's going to get hot soon, I'm sure people will be using air conditioners and some will need replacements, therefore the stock prices of air conditioning companies will increase."

A company can make profits 10,000% higher than the prior year or any of their competitors, but if the market expected they'd have profits 10,001% higher, the stock price will likely fall once the earnings report is published.
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Re: Air conditioner stocks

Post by Call_Me_Op »

ThisJustIn wrote: Mon May 25, 2020 3:45 pm (And yes, I'm of course not the only one who have thought of this, and maybe market priced this in, but please listen on.)
Not maybe - definitely. All publicly-available information is fully priced-in.
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Re: Air conditioner stocks

Post by retired@50 »

What about Carrier? Ticker CARR.

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Re: Air conditioner stocks

Post by cheese_breath »

If everybody stays home then those big office buildings won't need as much AC. They can consolidate on the lower floors and close off the higher ones. Which AC companies do you propose we dump?
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Re: Air conditioner stocks

Post by ThisJustIn »

retired@50 wrote: Mon May 25, 2020 3:57 pm What about Carrier? Ticker CARR.

Regards,
Good point, thanks. Recent split in April, worth checking.
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Re: Air conditioner stocks

Post by ThisJustIn »

cheese_breath wrote: Mon May 25, 2020 4:10 pm If everybody stays home then those big office buildings won't need as much AC. They can consolidate on the lower floors and close off the higher ones. Which AC companies do you propose we dump?
Big office buildings will keep the ACs, will not turn them back. It is the additional residential AC buys that is coming into market.

I propose you dump on to Bogleheads.
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Re: Air conditioner stocks

Post by CyclingDuo »

ThisJustIn wrote: Mon May 25, 2020 3:45 pm I know, I know, I'm a 3-fund portfolio holder, too, with small-cap value tilt (and I have a tilt on a couple of tech stocks due to RSUs of companies I worked for, which is treating me well).

So, based on the info above, please take a break from Bogle-"heads" (which I'm one of), and think outside a little bit.

Air conditioning will cherish. I checked a couple of companies (IR, TT) and they are impacted by quarantine. But, given that everybody is staying at home and working from home, my guess is there will be a lot of AC buying going on next few months. (And yes, I'm of course not the only one who have thought of this, and maybe market priced this in, but please listen on.)

I understand the risks of single stock purchases, or timing the market. I know, I very well know, that is why I follow Bogleheads philosophy and 3-fund portfolio. But, I have some play money to use in this experiment. It is an amount that I'm ok with losing, a very very small amount.

In the light of this, I was checking AC-only companies (not overall-electronics who also have ACs on the side). I found IR and TT. Do you have any other suggestions for AC companies?
We all already own all of the AC related stock in the total stock market index fund. If you want to increase your position beyond what the index fund owns...

https://finance.yahoo.com/news/air-cond ... 03517.html
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Re: Air conditioner stocks

Post by DoTheMath »

I'm pretty sure I don't understand your line of thinking. I might misunderstand but it sounds like you believe that there will be an increase in the number of installations of AC due to people staying at home this summer. Could you give some examples of where and how this will happen in a significant way? My thinking is that in the developed world, most people who want and can afford AC already have it.

I'm having a hard time thinking of a significant number of people who don't have AC because they are at work all day, but would choose to have it because they are home. In the US, maybe somewhere like Colorado which can get hot during the day but cools off at night? But even there people are home on the weekends and holidays and if they really mind the few hours of heat, they probably have AC already. It's hard to see a big enough uptick to make a difference to a national manufacturer (especially in contrast to sales going down because of a general downturn).

If this was the play I wanted to make, I would look for opportunities in regional installers. A slightly better option in my view is in maintenance. The increased usage of home AC might cause more wear and tear. A possibly better option, albeit a real flyer, would be in developing countries in hot climates (India? Indonesia?) where there may be a sizable market of people who only recently can afford AC.

Anyway, this is all speculation on my part. This seems like a hard place to identify winners and losers.
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Re: Air conditioner stocks

Post by cchrissyy »

i would think that by the end of May, the air conditioner manufacturers have already decided how many units they will make, have produced them, have priced them, and have already begun filling these orders by shipping to the retailers and distributors.

if i followed your reasoning at all, i would follow it to Costco or Sears or Home Depot, on the theory that retail consumers will buy every unit and the retailers, knowing this, will jack up the price. but i don't believe that. and even if true, it would only be a tiny slice of their total business, not a game changer.
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Re: Air conditioner stocks

Post by ThisJustIn »

cchrissyy wrote: Mon May 25, 2020 5:01 pm i would think that by the end of May, the air conditioner manufacturers have already decided how many units they will make, have produced them, have priced them, and have already begun filling these orders by shipping to the retailers and distributors.

if i followed your reasoning at all, i would follow it to Costco or Sears or Home Depot, on the theory that retail consumers will buy every unit and the retailers, knowing this, will jack up the price. but i don't believe that. and even if true, it would only be a tiny slice of their total business, not a game changer.
Well, air conditioner manufacturers may have underestimated the demand. What will happen is, there will be a shift from corporate AC purchases to residential AC purchases. And no, not all residential buildings have ACs, this is certainly not true. People work spend most of their time at work, and only need AC for the weekends. I foresee large number of residential AC purchases.

Regarding AC purchases from Costco or Sears or Home Depot, I agree, AC purchases are a small fraction of their revenue, and I will definitely not purchase stock of a company which is not purely in HVAC business. That's why I'm looking into TT, CARR, and a good suggestion from a Boglehead above, AAON, which makes HVAC equipments.
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Re: Air conditioner stocks

Post by ThisJustIn »

CyclingDuo wrote: Mon May 25, 2020 4:47 pm
ThisJustIn wrote: Mon May 25, 2020 3:45 pm I know, I know, I'm a 3-fund portfolio holder, too, with small-cap value tilt (and I have a tilt on a couple of tech stocks due to RSUs of companies I worked for, which is treating me well).

So, based on the info above, please take a break from Bogle-"heads" (which I'm one of), and think outside a little bit.

Air conditioning will cherish. I checked a couple of companies (IR, TT) and they are impacted by quarantine. But, given that everybody is staying at home and working from home, my guess is there will be a lot of AC buying going on next few months. (And yes, I'm of course not the only one who have thought of this, and maybe market priced this in, but please listen on.)

I understand the risks of single stock purchases, or timing the market. I know, I very well know, that is why I follow Bogleheads philosophy and 3-fund portfolio. But, I have some play money to use in this experiment. It is an amount that I'm ok with losing, a very very small amount.

In the light of this, I was checking AC-only companies (not overall-electronics who also have ACs on the side). I found IR and TT. Do you have any other suggestions for AC companies?
We all already own all of the AC related stock in the total stock market index fund. If you want to increase your position beyond what the index fund owns...

https://finance.yahoo.com/news/air-cond ... 03517.html
Good one, definitely checking AAON now. (And yes, my 3-fund portfolio already has a share of AC related stocks in it, I' well aware, thanks.)
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Re: Air conditioner stocks

Post by anonsdca »

ThisJustIn wrote: Mon May 25, 2020 3:45 pm I know, I know, I'm a 3-fund portfolio holder, too, with small-cap value tilt (and I have a tilt on a couple of tech stocks due to RSUs of companies I worked for, which is treating me well).

So, based on the info above, please take a break from Bogle-"heads" (which I'm one of), and think outside a little bit.

Air conditioning will cherish. I checked a couple of companies (IR, TT) and they are impacted by quarantine. But, given that everybody is staying at home and working from home, my guess is there will be a lot of AC buying going on next few months. (And yes, I'm of course not the only one who have thought of this, and maybe market priced this in, but please listen on.)

I understand the risks of single stock purchases, or timing the market. I know, I very well know, that is why I follow Bogleheads philosophy and 3-fund portfolio. But, I have some play money to use in this experiment. It is an amount that I'm ok with losing, a very very small amount.

In the light of this, I was checking AC-only companies (not overall-electronics who also have ACs on the side). I found IR and TT. Do you have any other suggestions for AC companies?
It baffles me why you (and others) initiate posts like this on individual stocks on this forum. There are so many other investing sites (and good ones) that deal with individual stock investing. Try them out, because you aren't going to get anything useful here on this topic.
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Re: Air conditioner stocks

Post by Teague »

Setting aside the individual stock stuff, I don't follow this reasoning. I'm pretty sure it's wrong. People have always stayed home. Days off, vacation days, sick days, weekends, all those hours before and after work and so on. They have already equipped their homes accordingly. It's not like folks have been spending every hour of every day at work and that just suddenly changed.
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Re: Air conditioner stocks

Post by Phineas J. Whoopee »

As much as working from home this summer may encourage purchases of air conditioners, except for less-than-full office buildings, it will discourage them in the southern hemisphere. Supply chains are global.

It's a big wide world out there.

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Re: Air conditioner stocks

Post by LadyGeek »

I removed an off-topic post and reply. As a reminder, see: General Etiquette
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Re: Air conditioner stocks

Post by anon_investor »

While I would discourage the OP from investing more than a funny money allocation in individual stock, I will try to provide something useful:

I am unfamiliar with the other stocks, but for Carrier (CARR), they make more than just HVAC equipment (so maybe look at what % of their revenue is derived from HVAC equipment), so they may not be a pure play on your AC thesis.
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Re: Air conditioner stocks

Post by basr518 »

Forget the seasonal stuff like HVAC companies. You're overthinking. I'd buy a utility, because you need electricity to run all this stuff each and every day whether you're in your office or home. I'm partial to one called Berkshire Hathaway Energy. Plus they have some other stuff as part of their larger conglomerate, haha. You might make money, you might not, what are you trying to accomplish going so consumer specific? Seems like a lot of headaches for so little upside if any. But as the saying goes it's your 💰. You just have to be right on the AC company you end up choosing.
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Re: Air conditioner stocks

Post by ThisJustIn »

Phineas J. Whoopee wrote: Mon May 25, 2020 5:51 pm As much as working from home this summer may encourage purchases of air conditioners, except for less-than-full office buildings, it will discourage them in the southern hemisphere. Supply chains are global.

It's a big wide world out there.

PJW
Sure, good one, but:

South Hemisphere: demand remains same.
North Hemisphere: demand increases.

Total increases.
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Re: Air conditioner stocks

Post by Yooper »

ThisJustIn, The tough part is to know when to sell - I personally wouldn't know. I don't buy the "it's already priced in" theory 100% of the time. A lot of the time yes, but not all of the time. So there are opportunities for those that think outside the box and get lucky. For giggles and grins about a month ago I looked into getting a bidet - and it had nothing to do with toilet paper shortage. The one I had narrowed down to was close to $350. Seemed like a lot and I just happened to camelcamelcamel it. Whoa! Went from the 230's in March up to the 350's almost overnight. And dropped back down to around $250 in May. Coincidence? Perhaps. But I think it had something to do with the lack of toilet paper and that lack was just enough to push some people from the "it would be nice to have some day" to "This is just the excuse I need".

Now if some enterprising individual thought, "Hmmm, people are going to freak out about this virus thing and people take their toilet paper seriously and toilet paper might have a temporary shortage and there might be a run on bidets and if I had bidet stocks I might be able to make some money and I promise I'll sell my stock once it hits $x or such and such date...." They just might make some money. Yes, I deliberately wrote the rambling sentence that way just to show there are a lot of variables. But it could be done. But you'd have to be luckier than I am to hit all the right angles at just the right time. I'm not lucky and it's too much risk for me with odds far lower than I'd be willing accept. But that doesn't mean it's a 100% losing idea either. If you're feeling it, go for it. Good luck.
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Re: Air conditioner stocks

Post by wilked »

My good friend is a VP of sales at one of the big A/C companies. I can assure you he doesn't see Covid as good for business.

Construction was frozen, being restarted, delays big projects 3-6 months. Investments for the next round of projects are being put on hold. These are his company's income sources. Residential is small potatoes comparatively. But since you are talking residential, residents are not actively opening up their wallets for a $20K A/C. Sure, the FANGs of the world might, but the average homeowner who suddenly has to work from home does not see things the same

It's a nice thought, but the logic doesn't hold. The user above who suggested looking more macro (ie utilities) is on point
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Re: Air conditioner stocks

Post by ScubaHogg »

ThisJustIn wrote: Mon May 25, 2020 4:33 pm
cheese_breath wrote: Mon May 25, 2020 4:10 pm If everybody stays home then those big office buildings won't need as much AC. They can consolidate on the lower floors and close off the higher ones. Which AC companies do you propose we dump?
Big office buildings will keep the ACs, will not turn them back. It is the additional residential AC buys that is coming into market.
I imagine some new office construction won’t happen that otherwise would have though? Seems like that could be offsetting
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Re: Air conditioner stocks

Post by flossy21 »

Check out Lennox (LII) and Johnson Controls (JCI).

The equipment you are describing is part of the "Consumer Durables" sector. Normally consumer durables suffer in a recession because consumer confidence is down. Think about it...are you going to rush out and buy a new refrigerator to replace your current fridge or wait and see how things go with COVID and the economy? Most people would opt to wait or to have the old fridge repaired rather than spend the money on a new fridge right now.
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Re: Air conditioner stocks

Post by Nate79 »

So you think with today's unprecedented number of people unemployed that they are going to go out and buy what is considered an extremely expensive purchase for their home?
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Re: Air conditioner stocks

Post by justsomeguy2018 »

Triple digit golfer wrote: Mon May 25, 2020 3:53 pm Why do you think that nobody else knows the same things that you know? People use more air conditioning every summer. Do you see an increased performance in those stocks relative to the market every summer?

Are you also going to buy stock in companies like Coca Cola and Pepsi, who sell bottled water? People sweat more in summer and will consume more water.

Don't you think this information is priced into the stock price already?

Unfortunately it is not as simple as, "People are home more, it's going to get hot soon, I'm sure people will be using air conditioners and some will need replacements, therefore the stock prices of air conditioning companies will increase."

A company can make profits 10,000% higher than the prior year or any of their competitors, but if the market expected they'd have profits 10,001% higher, the stock price will likely fall once the earnings report is published.
I saw this same line of thinking/commenting when Covid started regarding certain stocks that could benefit - "it's already all priced in, the market already knows all this, etc." - yet, somehow, those stocks still managed to outperform the market over the current course of the pandemic. It's almost as if....it wasn't all already priced in! 8-) If these things were actually true, stocks would never move up or down because everything would already be priced in.
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Re: Air conditioner stocks

Post by Triple digit golfer »

justsomeguy2018 wrote: Tue May 26, 2020 10:15 am
Triple digit golfer wrote: Mon May 25, 2020 3:53 pm Why do you think that nobody else knows the same things that you know? People use more air conditioning every summer. Do you see an increased performance in those stocks relative to the market every summer?

Are you also going to buy stock in companies like Coca Cola and Pepsi, who sell bottled water? People sweat more in summer and will consume more water.

Don't you think this information is priced into the stock price already?

Unfortunately it is not as simple as, "People are home more, it's going to get hot soon, I'm sure people will be using air conditioners and some will need replacements, therefore the stock prices of air conditioning companies will increase."

A company can make profits 10,000% higher than the prior year or any of their competitors, but if the market expected they'd have profits 10,001% higher, the stock price will likely fall once the earnings report is published.
I saw this same line of thinking/commenting when Covid started regarding certain stocks that could benefit - "it's already all priced in, the market already knows all this, etc." - yet, somehow, those stocks still managed to outperform the market over the current course of the pandemic. It's almost as if....it wasn't all already priced in! 8-) If these things were actually true, stocks would never move up or down because everything would already be priced in.
That is false.

All known information is already priced in. New information comes every day, heck, every minute, really. The price of a stock always reflects the market's estimate of the fair value, given the information known at the time.
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Re: Air conditioner stocks

Post by Valuethinker »

basr518 wrote: Mon May 25, 2020 7:10 pm Forget the seasonal stuff like HVAC companies. You're overthinking. I'd buy a utility, because you need electricity to run all this stuff each and every day whether you're in your office or home. I'm partial to one called Berkshire Hathaway Energy. Plus they have some other stuff as part of their larger conglomerate, haha. You might make money, you might not, what are you trying to accomplish going so consumer specific? Seems like a lot of headaches for so little upside if any. But as the saying goes it's your 💰. You just have to be right on the AC company you end up choosing.
The European experience is lockdown has led to 10-20% fall in electricity demand in terms of units shipped. Electricity prices in many markets are at record lows - the UK grid operator (National Grid) is paying one of the nuclear power plants to cut its production in half, to balance the system - too much power is being produced.

I don't know what has happened in NY & California but I would suspect something similar.

Domestic demand has risen maybe 5-10% but industrial and commercial demand (shopping malls, offices, leisure facilities like gyms etc.) has gone off a cliff. You don't need much AC for a couple of security guards and basic building systems. Like many office buildings, ours has been sealed and will need formal decontamination before we can use it again.

We shall see as lockdown ends. Residential AC is not such a big thing in Europe. But 2 countries with tough lockdown-in-place were Spain and Italy where they do have residential AC. So it will be interesting to see. China looks like it is recovering smoothly - amount of coal burnt, vehicle miles travelled etc.

"The New Normal" is not going to look like the old world. Social distancing in offices, stores etc. We are looking at changing to seats 2 m apart, 1 person at a time in the elevator, no keyboards or mice provided (everyone uses their laptop and a screen). Quite a few epidemiologists are talking of a late August-September "second wave" which will presumably imply another lock down then.
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Re: Air conditioner stocks

Post by AAA »

While there might be increased demand this summer, on the other hand supply chains may be somewhat compromised so all that demand may not be met. Also, many people lost their jobs so they will not be planning to buy new A/C's, etc. But if you do go ahead with this, please post again later in the year to let us know how it turned out.
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