Federal Reserve Chairman Ben Bernanke managed to spook the markets yet again last week. Like many investors, I watched his press conference and then witnessed the market‘s reaction as stocks slid south, trailing red.

Investors and analysts are concerned that rising interest rates threaten to curtail the housing boom that’s helped drive the economic rebound. This $5 trillion segment of the U.S. economy is often considered a bellwether for the economy as a whole.

In the following chart tracking the S&P 500 Homebuilding Sub-Industry Index, you can see the market’s reaction after Bernanke’s statements on June 19:

But while homebuilders have seen big drops in share price over the past few days, some home-improvement businesses have remained relatively unscathed.

In fact, the home-improvement company I’m going to tell you about has seen its share price rise more than 11% in the past five days.

Most investors have probably never heard of Jewett-Cameron Trading Co. (Nasdaq: JCTCF), but this $41 million company’s shares have gained more than 170% in the past year.

Jewett-Cameron sells wood products and specialty metal products (such as greenhouses and dog kennels) both directly to customers and as a distributer to big-box home improvement retailers like Lowe’s (NYSE: LOW) and Home Depot (NYSE: HD). Through various subsidiaries, the company also sells specialty tools and seed products.

The company’s sales have been growing at a brisk clip. Jewett-Cameron reported in February that its sales had grown 21% in its most recent quarter from the same period last year, to $14.2 million. #-ad_banner-#

Better yet, these increases in sales and revenue continue to find their way back to shareholders.

The company quadrupled its earnings per share (EPS) between 2011 and 2012, from 22 cents a share to 89 cents. And over a trailing 12-month period, this trend has continued, with EPS rising to 95 cents a share.

One of the forces behind Jewett-Cameron’s success is Donald Boone, who has led the company since 1987. As CEO, Boone took home only $37,000 in compensation last year, down from $39,000 the year before.

Instead of high salaries, Boone and his management team have instead aligned their interests with shareholders by keeping management costs down. Company insiders also own 82% of the company’s outstanding shares, which means they have a vested interest in seeing both share prices and EPS continue to rise.

There is some speculation that Boone, 72, might be near retirement. This fact alone could position Jewett-Cameron as a ripe acquisition target. Private equity firms love companies that are “bite-size,” have no debt and are positioning toward a change in management. In all these respects, Jewett-Cameron fits the bill.

Either way, future prospects for the company continue to look good. In spite of rising interest rates, the housing recovery has shown little sign of slowing down.

The National Association of Realtors recently reported a 4.2% rise in existing home sales from April to May and a total year-over-year increase of 12.9%. The National Association of Homebuilders’ monthly confidence gauge just hit its highest level in seven years, and new home constructions are up 6.8%.

These indicators all point to continued demand for home-improvement products. 

Risks to Consider: Jewett-Cameron is a small company, and its top 10 customers currently represent 65% of total sales. If these customers were lost and could not be replaced, the company could experience a significant decrease in sales and profitability.

The company does not pay a dividend and is therefore more suitable for growth investors.

Action to Take –> Jewett-Cameron is a great company that has been largely overlooked by Wall Street and other institutional investors. While cautious investors may want to wait for the dust to settle after the Fed‘s recent announcement, Jewett-Cameron offers solid value at today’s prices.

One note of caution: Shares are thinly traded (the average volume is less than 8,000 shares a day), so be sure to place a limit order and be patient to get the best price possible.

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