Wolseley Has a Strong Foundation

When things are good for the market, even the dregs go up. And when things are bad, well, companies with solid prospects suffer. Blame it on market psychology, the natural order of things, or whatever.

The point is, with seemingly all real estate and construction stocks struggling -- no matter how good they are -- now is the time to start stocking up on the winners among these stocks. Sure, the real estate market is bad and will not turn around anytime soon. But it will turn around eventually.

Now is a good time to buy into the long-term winners. They may not seem like good buys now, but they will likely show themselves in the future to have been today's bargains. Wolseley (WOS - commentary - Cramer's Take) is just such a company.

A Building Materials Supplier on the Cheap

There's a saying in the investment world -- "a rising tide raises all ships" -- meaning when the market goes up, just about all stocks are affected and find their prices going up, even the dregs of the market.

Less talked about is the converse, namely that a falling tide lowers all ships. We are seeing this phenomenon happening now with the real estate sector. Just about all companies with exposure to real estate, such as home builders and banks, are finding themselves out of favor. A mere whiff of a company having a connection to real estate or construction is enough to put its stock in the doghouse.

This is bad for such stocks, but not necessarily bad for stock market investors. Sure, many of these companies are struggling at the moment and some may be seriously wounded for a long time. But if you look beyond the short term and find solid stocks that today are battered down unfairly, chances are good they are excellent values. When the real estate market turns around -- and it will -- these companies are well positioned to take advantage of the uptick and leave their competitors behind.

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At the time of publication, Reese had no positions in the stock mentioned, although holdings can change at any time.

John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of the best-selling book, The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.

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