The Market's Fixer-Uppers By Spencer Jakab
Stocks surged Monday
on optimism over an end to a record-long U.S. government shutdown, but we're still waiting for a deal and attention has turned back to fundamentals. One thing weighing on stocks is creeping concern about the return on massive AI infrastructure investments. CoreWeave, a company at the center of the boom, reported a doubling of revenue , but its shares are down before the bell.
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The old saw about making money in real estate is that you should buy the ugliest house on a nice block. A smart strategy for buying stocks can be the inverse of that: Pick the strongest companies in a tough-looking sector.
One opportunity literally involves houses. Demand for the materials used to build and renovate homes is slumping, spooking investors in related industries.
There are some fine properties available for those with patience. Their shares aren't screaming bargains, but these five companies have management teams with a proven eye for shareholder returns.
One is Trex, the company that pioneered composite decking. Its stock price is down by more than half this year, having taken another dive after management expressed caution
on last week's quarterly earnings call.
Renovations boomed following the pandemic, but many homeowners no longer feel financially comfortable enough to upgrade their outdoor entertaining spaces. Trex took advantage of the Covid-19 windfall , buying back nearly 8% of its stock since 2019 and investing in manufacturing, new products and distribution.
Trex's return on invested capital $(ROIC)$, a measure of how well a company creates value, has averaged more than 30% in the past five years, according to FactSet. The typical S&P 500 company is only around 9%, and even lower excluding the Magnificent Seven.
James Hardie, a supplier of high-end siding that recently expanded into decking with a big acquisition , is sagging almost as badly as Trex, down 44% this year. Management says homeowners have been deferring remodeling projects recently. Its homebuilder customers are sitting on the largest number of completed, unsold homes in several years.
The ones they're still deciding to start are often smaller to match buyers' budgets. Builders FirstSource, a distributor of construction materials praised for its financial discipline , has had to adapt to lower demand per new dwelling. Its shares are down 25% year-to-date, but it also has been an opportunistic buyer of its own stock. Its ROIC has averaged more than 21% over the past five years.
NVR, a homebuilder that has attracted a following among investors for its capital-light business model, might be another buried gem. Its 30% plus return on invested capital is more than twice that of many large rivals. It also has bought back shares steadily.
Finally, retail and wholesale supplier Home Depot stands out for its bottom-line focus. Its 33% average ROIC in the past five years is nearly twice what it was during the housing bubble. Shares outstanding have halved since 2007.
Lower mortgage rates haven't done much to stimulate home buying
so these beaten-down stocks aren't for those seeking a quick flip. But their management teams seem to have the financial discipline to make the most of an ugly market.
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Stocks I'm Watching
CoreWeave : The provider of cloud-computing services said revenue more than doubled last quarter, boosted by the AI boom , while its net loss narrowed. However, shares fell premarket after CoreWeave flagged a delay by a data-center developer.
Beyond Meat : The plant-based protein company's loss widened and sales fell last quarter as demand from U.S. customers and restaurants fell . Shares dropped 6% ahead of the open.
Occidental Petroleum : The oil-and-gas producer posted mixed quarterly results . Adjusted earnings per share topped expectations, but revenue disappointed.
Paramount Skydance : Paramount reported growth from its streaming division in its first quarterly report since its merger with Skydance Media . It also raised its cost-cutting target to at least $3 billion. Shares rallied in offhours trading.
Rocket Lab : The space company posted a smaller-than-expected per-share net loss, while quarterly revenue topped forecasts . The stock soared roughly 10% before the bell.
SoftBank : The Japanese technology-investment conglomerate sold its Nvidia stake for $5.8 billion. SoftBank's quarterly net profit more than doubled because of gains from its OpenAI investment . Shares rose 2% in Tokyo.
Sony : The electronics and entertainment company raised its annual earnings forecast
and projected a smaller tariff hit, as quarterly net profit rose. Shares jumped 5.5% in Tokyo.
Rigetti Computing : The quantum-computing company logged a smaller-than-expected adjusted per-share loss. However, quarterly revenue disappointed. The stock fell 3% premarket.
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What I'm Reading America holds a sizable lead in AI, but China's government is working to tip the scales with a sweeping countrywide push, betting "swarms beat the titan." ( WSJ ) Microsoft finally has opened up a little bit about its dealings with OpenAI. It still has a long way to go to do right by investors. ( WSJ ) A group of Democratic senators is demanding the White House answer for higher electric bills they blame in part on the AI boom. ( WSJ ) Warren Buffett will hold on to his Class A Berkshire shares until his successor wins over investors. "That level of confidence shouldn't take long," he wrote. ( WSJ ) Do gamblers invest differently? An experiment. ( Joachim Klement ) Today in Markets History
On this day in 1993, The Wall Street Journal published a survey of 10 market pundits, asking them when the bull market would end. Nearly every one predicted a 10% decline by the middle of the following year, and famed market forecaster Joe Granville said that the Dow would drop to about 2900 by the spring. By March 1994, the Dow was at 3800.
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About Me
Business and finance have fascinated me for a long time. Before writing this newsletter, I edited The Wall Street Journal's Heard on the Street team for a decade, wrote two investment books and managed a team of stock analysts at a global investment bank.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
November 11, 2025 06:49 ET (11:49 GMT)
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