Gary Michel, President of Trane Residential Systems
Originally published: 01.01.14 by Terry Tanker
This month, we’re proud to rollout our newest column: HVACR Business Stock Index. Columnist Margot Crabtree is President of Trade Trends, Inc., a financial data services provider. She has been offering market analysis with customized regional and industry stock indices and financial commentaries since 1999.
If you aren’t familiar with stock charts, the numbers can seem overwhelming. American writer Irene Peter once said, “Anyone who thinks there’s safety in numbers hasn’t looked at the stock market pages.” Not to worry, Margot’s monthly commentary explains the ups and downs of the stocks related to the HVACR industry, and you don’t have to be a financial guru to read it. There are a number of ways that this economic information can be useful to you.
If you’ve been following AHRI shipment data on our homepage this year, you know unit sales have been up all year long. Additionally, most contractors have reported increased sales this year. Simply put, consumers are spending and interest rates are low. These factors help drive stock prices up. When stocks are flat, there is a general concern about the growth of the economy. Bankers start reviewing interest rates, and business owners consider whether they’ll move forward
If stock market fluctuations seem random and unpredictable to you, that’s because they are. The stock market both influences and is influenced by politics, consumer confidence levels, interest rates, and inflation. Severe weather and natural disasters also play a role in stock performance. In spite of this, there is a certain cycle to the market – and understanding the cycle can help you make solid business decisions.
According to Kimberly Amadeo, president of WorldMoneyWatch.com, there are four phases to a business cycle: expansion, peak, contraction, and trough. The expansion phase is marked by growth and confidence. Eventually, all this growth leads to inflation and interest rates begin to rise at the peak of the cycle. As those interest rates creep higher, lenders become more cautious, employers begin to consider job cuts, and consumers get scared. They may only buy necessities. The trough phase is when the market hits bottom, and it’s difficult to estimate just how low that bottom will be. At this point, the cycle begins again with expansion.
The HVACR Business Stock Index includes companies that are likely familiar to you as contractors. They are diversified industrial companies, such as United Technologies (UTX-NYSE) and Parker-Hannifin (PH-NYSE), HVAC companies, such as Lennox International (LII-NYSE) and Comfort Systems USA (FIX-NYSE), and automobile manufacturers, like Ford (F-NYSE) and General Motors (GM-NYSE). Why follow these specific companies rather than other more general indexes? Because you know them, you know their industries, and you know their products and services. Warren Buffet, Chairman and CEO of Berkshire Hathaway, suggests, “Why not invest your assets in the companies you really like? As Mae West once said, Too much of a good thing can be wonderful.”
The editorial focus and mission of HVACR Business is to “improve business performance through editorial excellence” by providing business owners and managers with the very best business management concepts available. We are dedicated to helping contractors master key management skills. We are your go-to source for the information necessary to build stronger, better, more profitable companies. Many decisions that you need to make to be a successful HVACR business owner are impacted by the stock market.
Margot’s monthly column will help you to better understand how the companies that impact your business are faring. You’ll have a better sense of when consumers might become budget conscious, and might look for different solutions for their HVACR problems. You’ll know when business loans will be harder to secure. You’ll know when companies in the HVACR Business Stock Index are bought or sold, and might begin to notice trends in their trading. We hope that this column will also help you better understand your retirement strategies and plan for the future.