Investors looking for the next great place to park their money might want to stop thinking about chips and routers and start thinking about doors and farm equipment. It may sound boring, but the returns on some of these stocks have been anything but dull in recent years. While more dynamic issues like Cisco ( CSCO) and Intel ( INTC) have each lost half their value since March 2000, doormaker Masonite ( MHM) has doubled and Tractor Supply ( TSCO), a company that operates retail farm and ranch stores, is up over 260%. Masonite was recently higher by 0.44%, to $16.05, while Tractor was up 0.6%, to $32.30. After such an impressive surge, you might think these stocks are overvalued, but analysts say that's not the case. Masonite trades at just 15 times last year's profits, while Tractor Supply trades at 24 times earnings. Both sport a low price-to-sales ratio. Indeed, Masonite said just last week that it will beat analysts' second-quarter earnings estimates by as much as 9 cents a share. Tractor Supply also raised guidance recently and now expects sales to be up as much as 41% this year.
Aside from strong financials, both firms are also the dominant players in their respective fields. After Premdor bought Masonite last year, the company's only real competitor is a private firm called Jeld-Wen. Meanwhile, Tractor Supply's main rival, Quality Stores, went out of business last year, enabling the retailer to purchase about 87 of that company's best stores. Even after Tuesday's stock split, Tractor Supply has just 18 million shares outstanding and because the stock has a very low average daily volume, it can be susceptible to big price swings. Meanwhile, Masonite is highly leveraged and owes at least some of its success to the strength in the housing market. If the economic backdrop were to change, some analysts fear that the stock could pull back. Still, the downside is seen as limited because the stock remains cheap. David Campbell, an analyst at Davenport, believes Tractor Supply actually has a lot of upside despite the recent advance. "I don't think there's a lot of hot money in the retail sector right now," he said.