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Hardware Retailing index scrambles into the black.

Now half way through the year, the editors of Hardware Retailing want to get a pulse on the Hardware Retailing Stock Index's recent overall performance. Following is a special semi-annual report.

Volatility bruised the Hardware Retailing Stock Index over the past six months, but the Index ended the period up 12.40 points, or 1.01 percent, to end at 1241.87. Advancing issues easily bypassed declining issues by a 13-to-4 count. Despite the modest gains compared with the national indices, the Hardware Retailing Stock Index improved in four of the six sessions. Some of the gains can be attributed to the rise on Wall Street overall, and some indicated by gains in housing and growth in factory and manufacturing activity over the period.

In October of 2013, the Institute for Supply Management (ISM) said its index of factory activity increased to 56.4, the strongest reading since April 2011, and better than the 55.1 expected by economists FactSet surveyed. Also in October 2013, business stockpiles rose 0.7 percent, the biggest improvement since the beginning of 2013. In November 2013, orders for durable goods were up by 3.5 percent, and core capital goods, a segment indicating business investment, rose at the best rate in 10 months. The Commerce Department reported that construction spending increased 1 percent in November 2013 to its best level since March 2009 and the eighth straight month of gains.

The ISM's December factory index increased to 57, and new orders reached a 3.5-year high. Home construction was off overall in the month, but the Commerce Department reported 2013 was the strongest year for home building since 2007. The same department reported that new home purchases grew by 9.6 percent in January, the strongest pace since July 2008. Economists Thomson Reuters polled thought January new home sales would fall to 400,000, but instead they rose to more than that figure, and December 2013's home sales were upwardly revised to 427,000. The Hardware Retailing Stock Index faltered recently when the housing sector cooled a bit, perhaps attributable to the cold weather over the winter. As the six-month period ended, the Thomson Reuters/University of Michigan index of consumer sentiment fell to 80.0 in March, down from 81.6 the month before. February new home sales were the weakest in five months, but consumer confidence rose to the highest level in six years.

The national markets registered a slow-and-steady climb in the latter part of 2013, but faltered in 2014 as extreme winter weather, turmoil in Russia and weakness in the Chinese economy created a stew of volatility. The potential for a government shutdown punctuated markets the first part of October 2013, but third quarter earnings stepped in and indices began to notch regular record closing highs; in November, the Nasdaq Composite reached 4,000 for the first time in 13 years. The Thomson Reuters/University of Michigan consumer sentiment index surpassed expectations in November 2013, with a final reading of 75.1, versus the median forecast of 73.5.

Lumber Liquidators (LL) was the volatility archetype and ended off 12.85 points, or 12.05 percent, making it the top dollar loser in the index this period. Each month reversed the direction of the month before, with four out of the six reflecting double-digit changes. In mid-December 2013, LL guided lower for its fourth quarter, When fourth quarter earnings were reported in February, however, LL beat on earnings, at $0.74 per share, higher than Zacks consensus average of $0.72 per share. Net sales rose 22.7 percent to $258.4 million. In mid-March, investment firm Piper Jaffray said LL's efforts to provide installation services in-house could boost the company's estimates in 2014 and 2015. LL closed at 93.80, up from its lowest six-month close of 88.99, and off its highest close of 114.19.

Builders FirstSource (BLDR) was the top percentage gainer in the index over this period, posting modest but steady gains in every month but one; in November, BLDR stock fell 0.36 points. In October 2013, BLDR reported earnings that swung from a loss of $13.6 million to net income of $12.6 million, or $0.13 per share in the third quarter this year. Sales shot up 38.1 percent to 402.9 million. Sales in the fourth quarter improved 28.3 percent from the previous year, to $369.1 million. Net income for the fourth quarter was $4.5 million, from a loss of $12 million in the year-ago quarter. At the end of our session, investment firm Deutsche Bank upped its rating on BLDR to "buy" from "hold" and its price target to $12 from $5. Builders First Source grew 3.22 points, or 54.76 percent, and was the top percentage gainer in the index. BLDR closed at 9.10.

The Hardware Retailing Stock Index is a customized index which reports the stock activity of the leading home improvement retailers, manufacturers and builders influencing the industry. It is published monthly in Hardware Retailing magazine and on Use these quantitative metrics for a benchmark to compare your business's operational performance. Please anticipate a two-month lag time for data reporting and collection. The Hardware Retailing Stock Index includes the following tickers: BLDR, BZH, BXC, HD, LOW, LL, MAS, MHO, NWL, PHM, SMG, SHLD, SHW, SWK, TSCO, VAL and WDFC.
Leading Index Comparisons         Price 3/31/14   Price 9/30/13

Hardware Retailing Stock Index      1,241.87         1,229.47
Dow Jones Industrial Average        16,457.66       15,129.67
S & P 500 Index                     1,872.34         1,681.55
NASDAQ Composite                    4,198.99         3,771.48

Leading Index Comparisons          Net Change     Percent Change

Hardware Retailing Stock Index        12.40           1.01%
Dow Jones Industrial Average        1,327.99          8.78%
S & P 500 Index                      190.79           11.35%
NASDAQ Composite                     427.51            11%

Best Performers

Best $: Sherwin-Williams        $14.95
Best %: Builders FirstSource    54.76%

Worst Performers

Worst $: Lumber Liquidators     -$12.85
Worst %: Bluelinx Holdings      -33.33%
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Title Annotation:STOCK REPORT: Special Semi-Annual Report
Publication:Hardware Retailing
Date:May 1, 2014
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