Jeffrey Cohen, US Advanced Computing Infrastructure, Inc.

We create a list of stocks with the largest price declines over the past year. We capture this by comparing the last close against the average price over the past year. This reflects the average loss from investors that bought the stock, and held it, over the past year.

All of these stocks are down by 85% or more in the past year, vs. average.

They say to buy low and sell high. However, sometimes buying low means holding lower. That is the case today, on May 28, 2024, watching the market after close.
​

We notice a few things.

• First, these stocks are overwhelmingly lower today, on a day when the NASDAQ reached a new high on NVIDIA strength.
• Second, these are small cap stocks. This is intuitively right. These stocks have fallen in value dramatically, and hence are low cap stocks. If these companies survive and thrive, then these valuations could become attractive in the single or double-digit equity capitalization levels.
• Third, we see our share of biotech and foreign firms. These can be hard to buy, hold, value and understand.

The number one stock on this list (bottom listing) is CRKN or Crown ElectroKinetics Corp. This stock was recently pumped up by 100% in a single day, then fell back. This stock is on the radar list for momentum trading. FFIE was recently $0.04 per share, and is now up over 25x to $1.17. These low-cap stocks can really move with the right momentum and attention, that reflects in volume and one-day excitement.

By Jeffrey Cohen, US Advanced Computing Infrastructure, Inc.

Today, we highlight a few stocks that had 10x or more of typical volume on May 24.

Why? These stocks were aggressively traded on Friday, and we expected them to be aggressively traded today (Tuesday, after a Monday holiday).

Stocks with the highest relative volume on May 24, 2024.
   1 LUCY   23374.9% Innovative Eyewear Inc                            
   2 NCPL   12439.2% Netcapital Inc                                    
   3 VSTM   7418.7% Verastem Inc                                      
   4 HLTH   6909.0% Cue Health Inc                                    
   5 SNPO   3652.1% Snap One Holdings Corp                            
   6 ONCO   2382.5% Onconetix Inc                                     
   7 SMX    2170.9% SMX (Security Matters) Plc                        
   8 GNLX   2147.5% Genelux Corp                                      
   9 KRMD   1736.0% KORU Medical Systems Inc                          
  10 KITT   1725.5% Nauticus Robotics Inc                             
  11 CNSP   1648.2% Cns Pharmaceuticals Inc                           
  12 MRUS   1461.7% Merus N.V                                         
  13 OPTT   1391.5% Ocean Power Technologies                          
  14 MBIO   1351.1% Mustang Bio Inc                                   
  15 SCPX   973.6% Scorpius Holdings Inc.                            
  16 TOVX   850.1% Theriva Biologics Inc                             
  17 WDAY   793.6% Workday Inc                                       
  18 KRON   661.5% Kronos Bio Inc                                    
  19 LIDR   658.2% AEye Inc                                          
  20 LILM   646.1% Lilium N.V                                        
  21 BCAB   643.5% BioAtla Inc                                       
  22 SLF    607.4% Sun Life Financial  Inc.                          
  23 AMPL   561.2% Amplitude Inc                                     
  24 BNED   540.3% Barnes & Noble Education Inc    

So, what happened today on Tuesday to stocks with 10x relative volume?

​Without looking, I know a few of these went crazy, with a few of them crashing lower.

​

The first note is that these stocks are typically very small capitalization names. They can be pumped, dumped, and massively impacted with relatively small volume...but with significant volume the sky (price up), or ground (price down), is the limit.

The second note is that these stocks were generally lower, with a few much lower. My guess or intuition (not advice) is that these stocks are being driven lower to allow for a Wednesday or Thursday pump higher, then another drive lower.

Some stocks are missing from our list based on intuition, which could be that they failed the data validation test in our quant run. 

Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.

We run our model frequently, but tonight we thought about it in a different way.
The best stock picked is a terrible stock with a back story. However, they paid out an outrageously large dividend and the stock fell 66%, or 3x the dividend, so this stock looks amazing to our model. Huge dividend payout. High expected return. Low variance. And now a low valuation. What could go wrong for the investor?

We don't know what could go right (it recovers) or wrong (it goes bankrupt), but we know that this is not the intention of the model. So, tonight, we are marking down the 'dividend adjustment' in our model from 100% to 50%. This works to 'add back' the price drop of the full dividend that we assume the market made on the ex-dividend date. We are lowering that adjustment today to add back 50% of the dividend paid to the stock price.

The second thing we did was to manually remove 11 stocks with a 20% or more dividend payout that actually happened in the past year, when divided by the stock price. For these 11 special stocks, one of which paid the outrageous 1x dividend, and another paid out a 1x dividend in response to a short attack. If they don't recur, we can add them back in a few months.

We also found a startling discovery. When we look at our stocks and use the raw variance and co-variance, we get a set of stocks to hold in our optimized portfolio. These have the best risk-adjusted return. However, when we look at a 'side calculation' we did to be able to compare all stocks, we divided actual variance by the square of the average stock price, and this gives a nice, simple percentage like 1% or 10% or in some cases, 100%. Low risk stocks score under 10%. This simplified model works when doing an excel spreadsheet analysis.

However, we are uncertain what would happen if we adjusted all risk factors before they are put into matrix form (variance, covariance, etc.). However, we do want to 'dampen down' the massively high expected returns for individual stocks in this smoking hot market, and we want to make variance more important in the selection of stocks. The market is so hot, and many stocks are now sporting BETA values greater than 3.0, that a hot stock could show an expected return of 40% or more.

We made a few adjustments to account for this. We set an adjustment factor to cut the CQNS_Power, or the relative weighting of expected returns, from no adjustment (or 100%) to 25%. This should significantly reduce the power of expected returns (which are running hot), and increase the relative power (unadjusted) of the stock price variance. A cut from one to one-fourth is a massive cut (over  90%), so we will see if it needs to be tuned to say one-third, one-half, three quarters, or even 95%).

We also cut the stock market return ceiling from 16% to 15%. We use the CAPM process to calculate expected returns. This assumes that the only thing that matters in predicting future stock price returns is to calculate the expected return to risk (or the return to holding risk assets over risk-free assets). We have now set a 1% lower cap to the return used in that calculation, from 16% to 15%. This should be a very small change, and within the realm of empirical evidence.

What do we expect to see:
1. We expect the dividend anomalies to be mitigated and eliminated. Paying out a 1x dividend will not 'head fake' our quant model.
2. We expect there still to be high expected returns (the market is hot), but they will have less weight on the model. The model should tip towards lower risk stock portfolios in this next run.
3. We will look at the small 'excel test' that compares the CQNS score and the simplified expected return - normalized variance calculation to see if the differences are still there, and if they are less intense.

Hope you enjoyed reading our 'inside baseball' on how we model our math and analyze stocks.

P.S. We recently decide to add back the smallest of the small cap stocks to our model. There is market action afoot that is pumping up small-capitalization stocks, so we want to bring visibility to those names. For those who only invest in larger capitalization stocks (say $250M and above), we can still tailor our run for your specifications.

Today was a pretty good day before the markets opened.

We were all getting used to 'higher for longer' interest rates by the Fed. Housing prices are rising, but so are mortgages, so as we expect housing sales fall. This creates a little drag in the economy. It also hurts income for the Pickup Truck Professional that works in construction, home improvement and related fields.

Current Events:
The war over Taipei has not started yet, but the People's Republic of China did send a few aircraft and ships to blockade it, so there was some tension there. The Ukraine vs. Russia war is not escalating, but Ukraine is losing. So, that isn't very good news. Israel and the proxies of Iran continue to fight, but that seems to have simmered down to a war of attrition. Politics are as usual. The news is fairly boring, and in fact I made it through about four new applications without a single 'oh no' or 'oh boy.'

The news from last night was that Nvidia was continuing to grow earnings because people want to buy their products. That seemed bullish.

We are still back to what the Federal Reserve Bank will do, but it seems they will keep interest rates between 5% and 6% for the next year or so, and continue to unwind their balance sheet every month.

So, what happened?

We are not sure. We did not hedge our one position that has somewhat liquid options, and we are upset about that because we have wasted the chance to cover about a 15% loss over the past week on one position. Hindsight is always 20/20, but I think we may be more aggressive in hedging. Need to remember that the hedge is not a martingale (in disguise). It is supposed to pay when the underlying stock goes the other way than what we want. Last time we did a huge martingale and lost (or spent) the option premium as we waited.

There are economic cycles at play here that nobody seems to be talking about, except manufacturing and retailer CEOs. Economic activity in terms of buying things at the retail level is slowing down. We could blame Amazon and eBay for taking all that business, but I am not sure this is a zero sum game. I think retail activity is down.

Well, let's see what tomorrow brings. If the market continues to fall, the high BETA stocks will fall faster than the low BETA stocks. For more information about BETA, please visit our negative BETA webpage here and our large and small stock BETA website here.

May 15, 2024
Jeffrey Cohen, President
US Advanced Computing Infrastructure, Inc.
​

We reviewed Q1 2024 earnings call transcripts for retailers and manufacturers in the home improvement, tools, and automotive tooling space. 

Companies reviewed:
Amazon.com, Emerson Electric, Home Depot, Fastenal, Snap-On, Hillman Solutions, and Stanley Black & Decker. 


AMAZON.COM (Retailer)
"We remain focused on making sure we're offering everyday low prices, which we know is even more important to our customers in this uncertain economic environment. As our results show, customers are shopping, but remain cautious, trading down on price when they can and seeking out deals."


Emerson Electric Company *(big, industrial tooling manufacturer)
"We continue to have confidence in the underlying market conditions. China weakness in the factory overshadowed by strength in India, Europe, Middle East and the rest of Asia."


Home Depot (Home improvement retailer)
"The quarter was impacted by a delayed start to Spring and continued softness in certain larger, discretionary projects. Big ticket count transactions or those over $1,000 were down 6.5% compared to the first quarter of last year. We continue to see softer engagement in larger discretionary – projects where customers typically use financing to fund the projects such as kitchen and bath remodels.

Pro and DIY customers’ performance was relatively in line with one another, but both were negative for the quarter. While Pro backlogs remain relatively stable, we hear from our Pros that homeowners continue to take on smaller projects."


Fastenal Company
"Sluggish demand. March was the first 50+ PMI reading after 16 consecutive months of sub-50 Purchasing Managers Index (PMI) readings. 

The tone of business activity from regional leadership is best characterized as steady at weak levels. Severe weather in January harmed demand."


Snap-On Tools (Automotive Industry tools manufacturer)
The automotive repair arena remains favorable. Vehicle OEM and dealerships continue investing in tools and equipment. Shops are humming, the bays are running at full capacity. Technicians (Techs) are well positioned, and they continue to invest but it's in quick payback items that will make a difference right away, but don't require a long-term payment stream."

Europe now has more than half a dozen countries in technical recession. China continues to struggle. India [is] booming.

Tools Group pivoting to smaller items, smaller purchases, with immediate payback. Sales [saw an] organic decrease of 7%."


Hillman Solutions Corporation (Home improvement items manufacturer)

"40 basis point headwind from price. The macroeconomic landscape in the home improvement sector continues to show muted signs of improving.

The Pick Up Truck Pro continues to be busy albeit, with smaller projects. DIY is starting to get more active, as the weather improved throughout the quarter. The overall market and foot traffic at our retailers were both negative compared to last year. Our retailers are cautiously optimistic for the second half of this year.

​We'll continue to manage our cost structure and business for this environment."


Stanley Black & Decker
"A significantly worse negative macro environment and corresponding revenue performance in 2023 and '24 versus our initial expectations at the outset of our transformation in mid-2022."

Cyclically depressed outdoor business. Professional (DeWalt) showed strength, but muted consumer and DIY demand, which pressured volume. Pricing was relatively flat, consistent with our expectations. Organic revenue for hand tools declined 7% pressured by lower DIY demand.

Tools & Outdoor performance by region. North America was down 2% organically, Europe, organic revenue was down 3% as declines in France and Germany were partially offset by growth in the Nordics and the UK. All other regions were up 7% organically in the quarter, driven by mid-teens growth in Latin America, Brazil, Mexico, Central America and the Caribbean"

May 14, 2024 Jeffrey Cohen, US Advanced Computing Infrastructure, Inc. 

Amazon.com
Let's look at Amazon's Q1 2024 sales and pricing performance. Not sure we can isolate home improvement, but we can capture global retail consumer trends. We will not be reviewing AWS, only Amazon Retail.

Dave Fildes - Vice President, Investor Relations
Andy Jassy - Chief Executive Officer
Brian Olsavsky - Chief Financial Officer

Increasing breadth in stores items, more selection: "Starting with our stores business, despite having hundreds of millions of items and the broadest selection available, we remain intensely focused on adding even more selection."

"We've recently launched a new generative AI tool that enables sellers to simply provide a URL to their own website, and we automatically create high-quality product detail pages on Amazon. Already, over 100,000 of our selling partners have used one or more of our GenAI tools."

"We remain focused on making sure we're offering everyday low prices, which we know is even more important to our customers in this uncertain economic environment. As our results show, customers are shopping, but remain cautious, trading down on price when they can and seeking out deals."

Speed in fulfillment matters

​"In this past Q1, we delivered to Prime members at our fastest speeds ever. In March, across our top 60 largest U.S. metro areas, nearly 60% of Prime members orders arrived the same or next day. And globally, in cities like Toronto, London, and Tokyo, about three out of four items were delivered the same or next day. Faster delivery times have another important effect. As we get items to customers this fast, customers choose Amazon to fulfill their shopping needs more frequently, and we can see the results in various areas, including how fast our Everyday Essentials business is growing and the continued increase in Prime member purchase frequency and total spend with us."

Amazon took market share from all retailers
"In the North America segment, first quarter revenue was $86.3 billion, an increase of 12% year-over-year. In the international segment, revenue was $31.9 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange. "

Emerson electric Company (EMR)

Colleen Mettler - Vice President, Investor Relations
Lal Karsanbhai - President & Chief Executive Officer
Mike Baughman - Chief Financial Officer
Ram Krishnan - Chief Operating Officer

CEO Karsanbhai said, " We continue to have confidence in the underlying market conditions, driven by demand in the process and hybrid markets aligned with secular macro trends; energy security and affordability, sustainability, nearshoring and digital transformation."

"The P&L execution was nearly flawless in the quarter. Underlying sales grew 8% operations leveraged at 54% expanding EBITDA by 140 basis points to 26% and delivering 25% EPS growth and 32% free cash flow growth. 2024 is the year of execution with no major portfolio moves planned. And through the first half, we feel confident and have raised our outlook for the year."

"Sales, operating leverage and adjusted earnings, all exceeded Q2 expectations. Stronger volumes were driven by outstanding operational performance and more backlog conversion than expected. Price/cost and business segment mix were also more favorable than expected."

China weakness in the factory overshadowed by strength in India, europe, Middle East and the rest of Asia. "Factory automation demand remained soft with continued weakness in China. Europe, Asia and the Middle East were particularly strong in the quarter with persistent strength in process markets driven by energy transition and traditional energy markets. One noteworthy example is India, which has seen double-digit growth in five of the last six quarters, including this quarter, driven by broad economic expansion across multiple segments."

All this growth, with expanding margins
"In Q2 gross margin was 52.2%, a 430 basis point improvement from the prior year."

May 14, 2024 Jeffrey Cohen US Advanced Computing Infrastructure, Inc.

We now look at Home Depot, which announced earnings for Q1 2024 today. Signs look grim, as the stock fell 0.6% today (half a day) and the headlines from their earnings are negative.

Isabel Janci – Vice President of Investor Relations and Treasurer
Ted Decker – Chair, President and CEO
Ann-Marie Campbell – Senior Executive Vice President
Billy Bastek – Executive Vice President, Merchandising
Richard McPhail – Executive Vice President and Chief Financial Officer
Chip Devine – Senior Vice President-Outside Sales

According to Ted Decker, CEO, "Sales for the first quarter were $36.4 billion, down 2.3% from the same period last year. Comp sales declined 2.8% from the same period last year and our U.S. stores had negative comps of 3.2%. Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year."

"While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects"

"Remember, we operate in a $45 trillion asset class, which represents the installed base of homes in the United States and we serve a highly fragmented addressable market of approximately $1 trillion. Within that TAM, the greatest opportunity is with the residential Pro contractor, who shops across many categories of home improvement products while working on complex projects. We've defined that specific opportunity as an approximately $250 billion TAM, of which we have relatively little share today."

Billy Bastek, EVP Merchandising, said "our sales were impacted by a delayed start to spring and continued softness in certain larger, discretionary projects. However, where weather was favorable, we saw good customer engagement and strength in outdoor projects."

Renamed the TOOL department to POWER: "Additionally, we have renamed our tools department to power and included outdoor power equipment to capture synergies and maximize the strength of our battery-powered platforms."

"power departments posted positive comps"

"During the first quarter, our comp transactions decreased 1.5% and comp average ticket decreased 1.3%. However, we continue to see our customers trading up for new and innovative products. Big ticket count transactions or those over $1,000 were down 6.5% compared to the first quarter of last year. We continue to see softer engagement in larger discretionary – projects where customers typically use financing to fund the projects such as kitchen and bath remodels."

"Turning to total company online sales, sales leveraging our digital platforms increased 3.3% compared to the first quarter of last year. For those customers that chose to transact with us online during the first quarter nearly half of our online orders were fulfilled through our stores."

" Pro and DIY customers’ performance was relatively in line with one another, but both were negative for the quarter."
"While Pro backlogs remain relatively stable, we hear from our Pros that homeowners continue to take on smaller projects. "

POWER TOOLS
The gift the keeps on giving. The loyalty program that keeps customers coming back to The Home Depot.

"The trend away from gas to battery-powered products is continuing, and we are well positioned with our assortment. We have the brands our customers are looking for, whether it's RYOBI, Milwaukee, DEWALT, Makita or RIDGID. We estimate that there are nearly 500 million batteries in the market today, and our assortment covers the vast majority of these batteries. In fact, more than 70% of batteries with brands that are exclusive to The Home Depot in the big box channel with hundreds of products across each of these platforms, this is one of the best loyalty programs that keeps customers coming back to The Home Depot."

CFO. Richard McPhail, said "In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April."

Margins were flat, with some small benefits: "In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink."

Home Depot expects flat sales in 2024, mostly.

"We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023."

In summary, Home Depot is very excited and upbeat about how they are ready for the future, but sales, pricing, and volumes are lower...and will remain lower for the remainder of 2024. The economic recovery isn't there...April was bad. 

May 14, 2024 Jeffrey Cohen, US Advanced Computing Infrastructure Inc.

Weakness in the US economy weakens demand.
​
Fastenal Company Q1 2024 earnings.

 Dan Florness, our President and Chief Executive Officer, said "The truth of the matter is the core issue remains sluggish demand. A positive we saw is after 16 consecutive months of sub-50 Purchasing Managers Index, we broke above 50 in the month of March. And the other day, I chatted with Holden and I said, how long have they been checking the PMI statistics and he said, yeah, since early 1970s. So, we did a look and there's been two periods that have had longer duration of 16 months."

"The one would have been in the early 1980s, I believe it was a 19-month duration. The other was in the dotcom meltdown year of the early 2000 that was about a 17 or 18-month duration. Now in full disclosures, they were a little bit longer. They were actually more severe as far as where it went into -- how far into the 40s that it went or even into the upper 30s. "

" about half of our vending sales involve safety products."


; and Holden Lewis, our Chief Financial Officer
"Total and daily sales in the first quarter of 2024 were up 1.9%. Q1 is seasonally low volume to start, but this year contended as well with severe weather in January and a good Friday holiday that fell in March for the first time in five years, an impact that was compounded by a following on the last business day of the quarter. This timing is estimated to have cost us 30 to 50 basis points of growth in the quarter. No matter how one treats this noise, however, it doesn't mask that the primary challenge remains poor underlying demand. Industrial production declined slightly in January and February, but the components that most directly affect Fastenal such as machinery, were much weaker than the overall index."

"The tone of business activity from regional leadership is best characterized as steady at weak levels. We are encouraged by the forward-looking PMI moving above 50 in March for the first time since October '22. However, current conditions remain better defined by the string of sub-50 readings that prevailed in the latter part of '23 and at the start of 2024. "

"gross margin in the first quarter of 2024 was 45.5%, down 20 basis points from the year ago period. Product and customer mix was a drag, partly offset by slightly positive price/cost,"

May 14, 2024 Jeffrey Cohen, US Advanced Computing Infrastructure, Inc.

Tools business faces headwinds in Q1 2024, driving flat to declining sales. We see one manufacturer losing gross margins on flat sales, while the other saw much higher gross margins, but on much lower volumes. Both of these CEOs blamed the macro environment for home projects and repair work. One talked about fear, due to the news cycle and inflation, reducing the demand for investments in tools used in trade.

Let's take a look at Snap On Tools for Q1 2024.
Snap-on Tools is a little different than DIY because it is targeted to professional auto repair shops. The shops themselves buy tools, as well as the individual technician. However, we expect some DIY and home car enthusiasts are buying, so we include them here.

Nick Pinchuk, Snap-on's Chief Executive Officer,
"From an overall perspective, we believe the automotive repair arena remains favorable. Vehicle OEM and dealerships continue investing in tools and equipment, preparing for the tie to new models, bringing the latest technology and drivetrains to the market. "
" And the report was generally that shops are humming, the bays are running at full capacity"
"Techs are well positioned, and they continue to invest but it's in quick payback items that will make a difference right away, but don't require a long-term payment stream."

"Now our Commercial and Industrial Group or what we call C&I, serving critical industries in the most international of all our groups, and in the quarter, C&I manages the difficult challenge of balancing multiple economies that are in economic turbulence."
"Europe now has more than half a dozen countries in technical recession. And then China – in the China environment, including the nearby countries, depending on it, they continue to struggle. India on the other hand, it's booming. Modi has the train running. So that's a positive in Asia amidst some very difficult economies."

Tools Group pivoting to smaller items, smaller purchases, with immediate payback.


​"The first quarter for the Tools Group was below our standard. However, we do remain confident, and we do see a pivot to focus on quick payback items registering a positive momentum and movement. Sales in the quarter were $500.1 million, including – reflected an organic decrease – including an organic decrease or reflecting an organic decrease of 7%. The Group's operating income margin was 23.5%, down 100 basis points."



Aldo Pagliari, Snap-on's Chief Financial Officer,
"Net sales of $1,182.3 million in the quarter compared to $1,183 million last year, reflecting an 0.8% organic sales decline."
"Consolidated gross margin of 50.5% improved 70 basis points from 49.8% last year, primarily reflecting benefits from lower material and other costs and savings from the company’s RCI initiatives."

Hillman Solutions Corp (HLMN)
In May 2024, Hillman reported their Q1 2024 earnings.

Chairman, President and CEO, Doug Cahill, "Net sales in the first quarter of 2024 increased slightly to $350.3 million from the year-ago quarter. Driving these results were the contribution of new business wins. The Koch acquisition was closed in January of this year. These were partially offset by the overall market and a 40 basis point headwind from price. "

"Adjusted gross margins totaled 47.6%, marking a 610 basis point improvement over the 41.5% during the year-ago quarter."

"The macroeconomic landscape in the home improvement sector continues to show muted signs of improving. As we've all heard, inflation continues to hang around, which has prevented the Fed from cutting rates. The result is that mortgage rates have remained elevated. These higher rates are limiting existing home sales, which does impact our business, as homeowners are unwilling to trade out of a 3% mortgage rate into a 7% mortgage.
While pent-up demand for existing home sales continues to build, we agree with our customers. A strong increase in existing home sales is likely to happen when we start to see rates move downward.
In the meantime, the Pick Up Truck Pro continues to be busy albeit, with smaller projects. And we did see the DIY is starts to get more active, as the weather improved throughout the quarter.
That said, the overall market and foot traffic at our retailers were both negative compared to last year which fell in line with our expectations. Our retailers are cautiously optimistic for the second half of this year. And if they're right we will be ready. But until then, we'll continue to manage our cost structure and business for this environment."

"Gross margin and EBITDA margins remain healthy at 71.6% and 30.7%, respectively."

"We provide a wide variety of hardware and related products across multiple product categories. Our products are used for repair, maintenance, remodel and these projects cannot be completed without Hillman type products."
"During 2022 and 2023 the home improvement industry has been under pressure yet Hillman continued to perform well, like it has for the last 60 years. Despite a tough macro environment, we continue to win new business, deepen our partnerships with our customers and strengthen our competitive moat."
Rocky Kraft, our Chief Financial Officer, said, "net sales in the first quarter of 2024 grew $350.3 million, an increase of 0.2% versus the prior year quarter of $349.7 million. First quarter adjusted gross margin increased by 610 basis points to 47.6% versus the prior year quarter of 41.5%.  "

May 14, 2024: Jeffrey Cohen, U.S. Advanced Computing Infrastructure, Inc.

Drivers of the industry
Each quarter we review the earnings and commentary from the home improvement industry. We watch the retailers (e.g., Menards, Lowe's and Home Depot) and the manufacturers (e.g., Stanley Black & Decker, Techtronics Industries, Ltd, and Snap-On, along with Bosch and other firms).

We also read the tea-leaves for the underlying drivers of strength in this industry:

• Good Weather
• Age of homes (older requires more work)
• Housing Prices (absolute level)
• Housing Price Growth Rate (TTM and forward expectation)
• Rate of Home Sales (new and used)

The last two items are largely driven by the economy, inflation, and interest rates.

If housing prices are high, and rising, and homes are selling rapidly, then people and professionals need tools to fix things up. Non-Discretionary repairs (e.g., replacing a broken appliance, window or home utility) need to be completed all the time. However, the larger projects and discretionary projects are what move this industry sub-segment.

Q1 2024 results are starting to trickle in. What do we see?

Techtronic Industries Company Limited (TTNDY)
Leading manufacturer of tools and vacuum machines out of PRC announced a fat dividend of $0.627 ex-date May 16, 2024. Stock has been rising since 1 March 2024.

Makita Corporation (MKTAY)
No news

Stanley Black & Decker (SWK) announced earnings in early May. 
KTA: Flat, weak, slightly negative volumes and pricing in North America and Europe.

Don Allan, President and CEO, "This is particularly notable considering a significantly worse negative macro environment and corresponding revenue performance in 2023 and '24 versus our initial expectations at the outset of our transformation in mid-2022."

"cyclically depressed outdoor business and the rapidly recovering aerospace fastener business"

Chris Nelson, COO, EVP and President of Tools & Outdoor, "We believe our share position in tools is now stable to increasing. For example, our 2023 point-of-sale data in tools performed better than the category average across the North American home centers, which was led by our iconic DEWALT Professional brand."

"organic revenue was flat as Engineered Fastening and DEWALT growth was offset by muted consumer and DIY demand"

"Beginning with Tools & Outdoor, first quarter revenue was approximately $3.3 billion, down 1% organically versus prior year as growth in DEWALT was more than offset by muted consumer and DIY demand, which pressured volume. Pricing was relatively flat, consistent with our expectations. "

"Organic revenue for hand tools declined 7% pressured by lower DIY demand."

"Turning to Tools & Outdoor performance by region. North America was down 2% organically, driven by factors consistent with the overall segment. In Europe, organic revenue was down 3% as declines in France and Germany were partially offset by growth in the Nordics and the UK."

"In aggregate, all other regions were up 7% organically in the quarter, driven by mid-teens growth in Latin America, Brazil, Mexico, Central America and the Caribbean led this performance for the quarter."