Restoration Hardware (RH)

Restoration Hardware (RH) is a luxury brand in the home furnishings marketplace, offering furniture, lighting, textiles, bathware, décor, outdoor and garden, as well as baby & child products.

RH offers a unique service: mass production of curated furnishings, etc. that previously existed in only fragmented offerings.  That sounds cool and all, but honestly, I really don't care for their furniture all that much.  Good thing, because it is mostly outside of my income level anyway.  So why do I have a position in RH?

RH is revamping its retail locations to become full-scale galleries.  This revamping dramatically increases RH's revenues and earnings attributed to the revamped store.  RH is in the very early stages of this process and is already showing great dividends in earnings/revenues growth due to its retail strategy.

This is a somewhat pricey position, with a PE typically in the 30s.  However, the estimated growth rate puts RH at a generally reasonable PEG ratio, and management has an intense focus on learning and improving on their practices.  RH's management strives to be innovative in every aspect of the business.  The long-term prospects of RH seem intact, which justifies the lofty PE to me.

This position trades wildly on very little (almost no) relevant news.  Therefore, it is a great position to take advantage of the volatility.  I like to buy and sell small chunks, in addition to maintaining my core position, as the share price fluctuates wildly and unreasonably.

What to watch for: Not much, really.  Housing data, performance of "similar" companies like Williams Sonoma, retail data - sure, I guess.  The only thing that really matters is that the long-term retail transformation of RH is intact.

Common Cents Take: RH is a great long-term, high growth play with ample opportunity to increase portfolio returns by taking advantage of the stock's volatility.