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4 Stocks to Buy as Single-Family Housing Powers Growth
Zacks
Swarup Gupta
ZacksFebruary 22, 2017Comment
Data released last week showed that housing starts declined over the month of January while homebuilders’ confidence slipped this month. Though these reports may seem to be bad tidings at first glance, closer inspection reveals that the housing recovery remains on track. This is borne out by the substantial increase in the forward looking indicator, building permits.
Meanwhile, a bunch of reports released over February clearly show that single family housing has become the primary growth catalyst for the homebuilding sector. Such a trend is likely to continue later this year, what with mortgage rates still at appreciably low levels and demand outstripping supply. In such a situation, selecting homebuilding stocks with strong fundamentals makes for a wise investment option.
Building Permits Surge, Homebuilder Confidence Remains High
In January, housing starts declined by 2.6% to a seasonally adjusted annual rate of 1,246,000. However, this reading was higher than the consensus estimate of 1,225,000. Additionally, it represents a 10.5% increase from Jan 2016’s reading of 1,128,000. More importantly, December’s figure was upwardly revised from the initial estimate of 1,226,000 to 1,279,000.
Moreover, building permits increased 4.6% to a seasonally adjusted annual rate of 1,285,000, significantly higher than the consensus estimate of 1,217,000. This was the highest level witnessed since Nov 2015. This substantial increase for the forward looking indicator implies that the sector is likely to experience better times in the months ahead.
The latest reading of the National Association of Home Builders (NAHB)/Wells Fargo builder sentiment index seems to confirm such a view. Despite the fact that the index declined by 2 points to touch 65 for the month of February, it remains well above the key level of 50. Any level above 50 indicates that builders’ views about sale conditions continue to remain optimistic. In fact, this is the 32nd consecutive month when a level of 50 has been observed.
Single-Family Starts Rise Appreciably
The decline in January’s housing starts numbers was primarily due to a fall in the construction of multi-family projects. The multi-family housing segment category experienced a decline of 7.9% to a seasonally adjusted rate of 421,000. In contrast, starts for single-family units increased by 1.9% to a seasonally adjusted rate of 823,000.
According to Wells Fargo's Economics Group, the extent of the decline in housing starts was more or less in keeping with expectations. Meanwhile, the volatile multi-family category was possibly entering a quiet period, the group said. This is in line with the NAHB’s prediction that homebuilding growth will be fueled by single family housing this year.
In fact, for the single-family 55+ category, builder confidence remains firm. This optimism is being driven by an aging baby boomer population and the new found confidence provided by presidential election results. The NAHB’s 55+ Housing Market index closed 4Q16 at a level of 67. This represents an eight point improvement over the third quarter and is the highest ever reading registered since the index was started in 2008.
Our Choices
Despite last month’s dip in housing starts and the decline in homebuilder confidence observed this month, growth for the housing sector remains steady. Single family starts increased last month and is expected to drive growth for the sector in the year ahead.
Picking stocks of homebuilders engaged in the construction of single-family units makes for a smart option now. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Homebuilder Picks Vs Sector Performance (1 Year)
NVR, Inc. NVR is involved in the construction and sale of single-family detached homes, townhomes and condominium buildings.
NVR, Inc. has a Zacks Rank #1 (Strong Buy). Its expected earnings growth for the current year is 23.6%. Its earnings estimate for the current year has improved by 5.5% over the last 30 days. The stock has returned 21.9% over the last one year, outperforming the Zacks Building Products - Home Builders sector, which has gained 21.6% over the same period.
PulteGroup Inc. PHM engages in the homebuilding and financial services businesses primarily in the U.S. The Homebuilding segment offers a wide variety of home designs including single family detached, townhouses, condominiums and duplexes.
PulteGroup has expected earnings growth of 30.1% for the current year. Its earnings estimate for the current year has improved by 9.6% over the last 30 days. The stock has returned 25.6% over the last one year, outperforming the Zacks Building Products - Home Builders sector, which has gained 21.6% over the same period. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
William Lyon Homes WLH is primarily engaged in the design, construction, marketing and sale of single-family detached and attached homes in California, Arizona, Nevada, Colorado and Washington.
William Lyon has a Zacks Rank #2 (Buy). The company has expected earnings growth of 34.4% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 8.30, lower than the industry average of 9.85. The stock has returned 95.3% over the last one year, outperforming the Zacks Building Products - Home Builders sector, which has gained 21.6% over the same period.
D.R. Horton, Inc. DHI is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets.
D.R. Horton has gained 18.4% over the last one year, underperforming the Zacks Building Products - Home Builders Market sector, which has gained 21.6% over the same period. However, it has a Zacks Rank 2.The company has expected earnings growth of 15.6% for the current year. Its earnings estimate for the current year has improved by 2.6% over the last 30 days. This provides a good opportunity to buy the stock which remains valued below its market potential at this point.
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HOV is not mentioned but this is a rising tide. HOV has risen faster and farther than other homebuilders since Trump was elected. HOV is not the homebuilding leader and it wasn't during the last housing boom but its % gain was the biggest except for NVR. NVR unlike HOV didn't get hammered when the boom busted. For NVR (at an all time high) to gain 100% it will need to go up $1900 per share but HOV will only need to go up $2.3 per share and it will still only be $4, $69 below its split adjusted $73 high. IMO HOV is the best homebuilding stock to own. The last housing boom I sold HOV way way to early. This time I won't make that mistake.
Homebuilders Candle Glance charts
http://stockcharts.com/freecharts/candleglance.html?HOV,KBH,NVR,TOL,LEN,CAA,ITB,DHI,MTH,Bzh,SKY,GFA|D|F20|0
Thats what i plan on doing, my stop never triggered and its been steadly moving higher. Home ownership lowest in 50 yrs bottom of cycle, trump will spark building boom
Hmm chart not looking too bad. I picked up some shares at 2.34 a few days ago to hold hopefully long term.
good job, I need to follow u on this one~!
Wow thanks for the fast and detailed response. I took some time off trading bc life got too busy but I'm gonna ease back into it. Tired of the 3x POS turds and looking more at small and micro cap stocks. Thanks for the suggestions.
I held the shares I bought at $1.68sh and flipped the $1.5s shares when it stalled $2.8s. I re-bought them at $2.15 and are getting close to getting stopped out.
HOV rallied on the anticipation of Trumps low taxes, jobs, building. Honeymoon is over now Trump better focus and get those 3 things done without getting sidetracked by Obama care, I say let it implode and tell all the sick poor people too bad well give you a one way ticket to a country of your choice with free shtt. Or draft all the Obama care sick into the military then simply put them on some Navy boats in the Pesian Gulf run them back and forth thru the Straits of Hormuz. Sooner or later Iran will do something and we can have a modern day Gulf of Tonken. Trump will fight to win and we can wipe out all the Obama sick in one massive invasion. Then use some of our nukes to take out all the Iran Nuclear progam. If they whine complain and don't like it then lob a nuke or two and wipe out Mullahs. If you look at enough charts and watch the news you will come to the conclusion that the world population needs a 62% fib retracement.
If HOV continues lower it could go to $2 then the $200ma. I will continue to hold the $1.68s and flip the other shares.
Heres a couple other stocks I have flipped and look like could be good trades in the coming months.
TGB $1.45 I didn't get in this until it broke above $1. I sold it last week right where it is now. I would like to see it pull back toward $1 before moving higher.
GMO .55
I looked thru a bunch of Base Metals and made a Candle Glance of the ones that looked tradeable.
http://stockcharts.com/freecharts/candleglance.html?LLEX,NAK,CENX,AA,GMO,SCCO,FCX,PLM,SVBL,SWC,tgb,urg|B|
Heres a link that has several stocks in these industries. If your going to rebuild this country you will use resources.
http://www.miningfeeds.com/copper-mining-report-united-states-of-america
So are you gonna hold a core position HOV long term or you just flipping it intermittently?
I got in at 2.28 I am hoping for this to hit it's 52 week high or higher. If not I will short this stock..
2017 just may be the year for HOV to recover.... no reason for this to be priced for bankruptcy anymore!
So glad I added more at $1.66 and held...
Got a boatload at $1.66 and made a ton, but more upside under the Trump Administration and in the Sun...sure is fun during this run.
HOV is top 10 USA Home builder and Trump will truely make america great again by allowing home builders to lead the way out of great recession.
IMO, home builders will lead in pps during this recovery...besides fnf.
HOV has the best quality of home construction with the least amount of construction defects. I see most upside as compared to other home builders here with HOV...
HOV fundamental analysis highlights stock maybe +20% overvalued b4 earnings:
Fair Value Analysis
Thursday Earning Release...Betting HOV tells story of big win...
Hard Charging HOV $2.4 +.10 +4% lots of long term upside potential in the next few years under the Master Builder Trump administration. Home ownership at lowest in 50 yrs. Gonna be a entry level housing boom and HOV builds entry level homes in major metro areas. Of all the home builders HOV is down the greatest % from its high of $71 split adjusted. Multi multi bagger ahead for HOV. Just hang on for the ride and don't get off too early. That was the mistake I made years ago not to be made again.
Could be Trump Effect...Lower taxes...US Company. Could be buyout rumor I suppose.
Could be Trump Effect...Lower taxes...US Company. Could be buyout rumor I suppose.
HOV has been hammered and drifting along the bottom for the last few years. Home ownership lowest in over 40yrs. The stagnation of the Obama administration can be seen in the HOV homebuilding chart. By no means is HOV a leader in the industry but from a chart perspective HOV has the most Percentage upside potential of all the homebuilders. The HOV high was 72.91 on 7/21/05 at $2 thats 35 bagger away. Most likely HOV won't reach those levels but with Trump economic stimulus coming HOV could 5-10 bag. The worst is behind HOV, 2017 will be a return to profitability. HOV builds entry level homes. Trump will work to put the average American back to work in good paying jobs which results in HOV Home sales. Not since Jimmy Carter was kicked out of the White House by Reagan has there been as much optimism and feeling of Good Riddance.
Why Hovnanian Enterprises Stock Jumped 10% on Friday
The stock's for sale, and potential buyers are queuing up.
Rich Smith (TMFDitty) Dec 2, 2016 at 6:50PM
Reading Tea Leaves
INVESTORS WHO BID UP HOVNANIAN STOCK ON FRIDAY MAY HAVE BEEN READING THE TEA LEAVES AHEAD OF NEXT WEEK'S EARNINGS REPORT. IMAGE SOURCE: GETTY IMAGES.
What happened
Donald Trump's pick to run the Treasury Department uttered some frightening words for homeowners -- and investors in homebuilders -- this week, promising to "cap" the deduction of mortgage interest payments from taxpayers' income taxes sometime in the next four years. And yet, shares of homebuilder Hovnanian Enterprises (NYSE:HOV) nonetheless were off to the races in Friday trading, gaining as much as 10.5% during the day before closing up 8.5%.
What gives?
So what
Political promises come and political promises go, and anything the President-elect's cabinet wants to get done must first survive Congress before it can become a law. Meanwhile, Hovnanian soldiers on in the business of building and selling houses -- and reporting earnings from same.
In that regard, investors may be discounting Treasury pick Mnuchin's threat to cap the mortgage interest deduction at some time in the far future, and choosing instead to focus on Hovnanian's upcoming earnings report, which is due out on Thursday, December 8.
Now what
According to analysts who follow the company, Hovnanian is expected to report a $0.02 per-share loss for the fiscal year on Thursday. If they're right, that won't be "good" news exactly, but it will be a smaller loss than the $0.11 per-share loss reported in fiscal 2015. At the same time, analysts are looking to see Hovnanian report a big jump in sales for the year, with $2.77 billion in 2016 revenue eclipsing last year's total by 29%.
Even more important than the 2016 results could be Hovnanian's promises for the year ahead. Currently unprofitable and likely to remain so after Thursday's results, Hovnanian is expected to return to profitability in 2017. If it confirms this expectation this coming week, and perhaps offers hope of earning more than analysts expect it to earn ($0.09 per share for 2017 is the current consensus), then investors who bid up Hovnanian shares on Friday could discover that they weren't just early -- but also right to buy.
Hey Detearing!
Hope all is well!
Why are we moving today? Any ideas?
Loaded big just under $2 yesterday and was surprised to see a nice 8% pop near the open. I was anticipating something of a pop before earnings, but I guess I just got lucky! Again...lol
I do recall this happening in December of 2012...pop n lock!
Two Home Builders in the Hottest Markets
CalAtlantic and KB Home have the most exposure to the top 10 new-construction housing markets in the U.S.
Oct. 3, 2016 4:30 p.m. ET
MKM Partners
We are introducing a new monthly housing report wherein we will focus on the health of the top 10 new-construction housing markets in the U.S., which we estimate represent roughly 26% of total new-home sales.
We rely mostly on publicly available real estate data -- this is primarily resale data, but we think it can still provide us a good look into the health of the markets. In this first of our series, we would describe the aggregate health of the top 10 markets in August as relatively strong, with a total heat index market score of 70.6 (out of 100). Seattle was our strongest market in August, with Houston the weakest, albeit improving a bit.
We score each market between 0 and 100 individually using a rating system based on 10 housing and macro metrics, including sales, pending sales, inventory levels, price appreciation, permit growth, employment statistics, GDP growth, population growth and construction spending.
For August data, Seattle was the highest-scoring market (84.3), followed by Orlando (75.7) and San Antonio (74.5). The lowest-scoring markets in August were Houston (52.0), Washington D.C. (61.7) and Dallas (70.2). We note that even our slowest-growing markets scored above a 50 in August, as trends generally improved across most cities and inventory levels remain low.
Total home sales (mostly resale) in the top 10 markets in the U.S. were up 10% year-over-year in August. This was a marked improvement from a very weak July, with sequential growth improvements noted in nine of the 10 housing markets tracked (Atlanta being the exception). Total sales on a 3-month rolling average basis are up 1.6% for the 10 markets. This is closer to the national existing home sales rate that has been reported over the past few months.
Total inventory in the top 10 markets fell slightly year-over-year in August, after having risen slightly in the previous few months. Monthly supply in aggregate was roughly 2.5 months of supply for these markets and fell slightly sequentially. Houston inventory continues to rise, but is at 4.0 months of supply.
Pending home sales were up 1% year-over-year for the seven markets that report this metric, an improvement over flattish sales in the prior two months.
Based on the relative exposure of each of the builders in our coverage universe, we created a ranking of each builder, which takes into account overall presence in each top 10 markets and the health of that market. For this ranking, CalAtlantic Group (CAA) (rated at Buy) ($45 price target) garners the top spot, followed by KB Home (KBH) (rated at Neutral) ($13 estimated fair value). NVR (NVR) (rated at Neutral) ($1,600 estimated fair value) comes in last (due to its limited exposure to the top 10 markets).
Hovnanian Enterprises (HOV) (rated at Neutral) ($1.75 estimated fair value) has the highest relative exposure to the top 10 markets (we estimate at 53% of its total communities), but its overall score was hurt by the company’s large exposure to the Houston market.
We were pleasantly surprised to see the improvement in sales in many of the markets in August and given that the data came from 10 different data sources, we are inclined to believe it wasn’t coincidence. The low supply in these markets should be conducive to a positive environment for homebuilders, as long as the macro data remains constructive. We continue to believe that CalAtlantic provides good value in this space, trading at 1.3 times book value, especially given the strong relative score it receives in our analysis. The stock may be in a holding pattern for a little while, however, until it can address what we believe may be some company-specific issues in its Southwest region. We continue to also like Toll Brothers (TOL) (rated at Buy) ($38 price target), with our thesis having less to do with its positioning in the top 10 markets and more to do with the potential margin growth we see next year due to improved mix in California and New York City.
Bought HOV $1.64-.68 on and around the 200ma. Not much excitement in housing stocks right now. buying this for long term holding. Home ownership is at the lowest level in 50 years. There is shortages in many of the major cities. I owned HOV prior to the housing boom about 15 years ago. I traded it around $4. HOV went to over $500 per share split adjusted at the height of the housing boom. They were not an industry leader then and they aren't now but a rising tide lifts all boats. I looked at the charts of the home builders LEN TOL PHM are down about 50% from their former highs. Their upside potential is not as great as HOV's. If Trump gets elected I expect their to be a building boom in many of the broken cities run down by democrats. If Hilary get elected just sell it and put the money to trading 3X etfs. I like HOV chart for its upside potential for multi-bagger. When I owned it at $4 I would have never thought it could or would go to over $500 per share. Its been 10 years since the housing boom peaked, economic cycle moves up then down then up again.
Long term chart link high over $70
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hov&insttype=&freq=2&show=&time=20
Very good TA, keep up the good work.
Technical indicators and historic trends, leads me to believe we will continue to see upward movement for approximately 8 - 10 more trading sessions.
HOV breaks the $1.80 resistance barrier! Closes at $1.81 and sets a high of $1.86. New price target is $2.13.
This is the third post this year, not much love for this company, and the stock shows it.
I remember a few years ago, HOV popped huge at end of year rally...perhaps again?
$HOV website, Summaries:
http://www.khov.com/
Summaries(Per 12/4 HOV Q4 report):
1)Q4 2015 eps= $0.16 per share, HOV is profitable.
2)Fiscal 2015 rev= $2.15 billion dollars.
3)Fiscal 2016 rev will be between $2.7 billion and $3.1 billion dollars, a big increase comparing to its fiscal 2015 rev of $2.15 billion dollars.
4)12/4 jobs report was good, more people will buy houses because they get jobs easily.
$$$$$$$ HOV $$$$$$$$$$
$HOV Fiscal 2016 FINANCIAL GUIDANCE:
http://finance.yahoo.com/news/hovnanian-enterprises-reports-fiscal-2015-141500900.html
$HOV Yes and 44.01% Institutional Ownership and Nasdaq 1 year price target 3.00 ! also Insider buying 10/21/2015 information at Nasdaq.com !! been on my watch list a long time
********Computing HOV price target********
HOV Q4 results are GOOD, VERY GOOD, Its esp is $0.16 per share.
($0.16 Q4)*(4 Quarters per year)=$0.64
($0.64)*(30)=$19.20 per share.
Conclusion: HOV stock will be= $19.20 per share naturally and EASILY.
Therefore, HOV= STRONG BUY.
Go HOV Go ********
HOV is profitable.
Go HOV GO ***********
12/4 JOBS report was GOOD(the best report in years) and this is good for HOV because people buy houses when they have jobs.
Go HOV Go ****************
12/5 HOV Q4 report: GOOD RESULTS.
http://finance.yahoo.com/news/hovnanian-enterprises-reports-fiscal-2015-141500900.html
Go Go HOV...
More than doubled down yesterday...so glad I did...perhaps we get a run in the right direction now...about time.
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