Why the Harvey Norman (ASX:HVN) share price is up 9% in a month

Lockdowns and simple maths may be to answer.

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The Harvey Norman Holdings Limited (ASX: HVN) share price is having a month to remember. By close of trade on Thursday, shares in the electronics and home appliances company were trading for $5.78 – up 2.12%. The S&P/ASX 200 Index (ASX: XJO) ended the day 0.12% lower, for context.

Over the month, its shares have risen an astonishing 8.82%. While the company hasn't made any market announcements since 18 June, something has clearly made investors excited.

Let's take a closer look.

"Go Harvey Norman, GO!"

The biggest story in the country, including for the financial markets, is the ongoing pandemic. As of writing, Sydney, pockets of regional NSW, the ACT, and Melbourne are in lockdown. South-east Queensland, Cairns, and regional Victoria have recently exited their own stay-at-home orders. In other words, about 2/3s of the country are in or have been in lockdown.

As we saw last year, home appliance and essential retailers like Harvey Norman, Wesfarmers Ltd (ASX: WES), and Nick Scali Limited (ASX: NCK) have done well with stay-at-home orders. In theory, consumers options are limited and there is more use of homewares during covid lockdowns. This, therefore, should benefit these companies. In the same period Harvey Norman is up nearly 9%, Wesfarmers is 10.5% higher and Nick Scali has jumped 15.4%.

These lockdowns up and down the east coast of Australia may be benefitting the Harvey Norman share price.

Another reason may be simple arithmetic. Harvey Norman shares are coming off a lowish base from the previous month.

Take this example. I own shares in XYZ. I bought these shares for $10 and they are now trading for $5. That is a fall of 50%. If tomorrow these shares went up to $9 that would be an 80% rise. While the rise is greater than the fall in relative terms, in absolute terms the opposite is true.

Harvey Norman share price snapshot

Over the past 12 months, the Harvey Norman share price has outperformed the ASX 200 by about 20 percentage points. Year-to-date it is about 8 percentage points better off than the benchmark index.

Harvey Norman has a market capitalisation of about $7 billion.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Harvey Norman Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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