Real Estate Sector Ideas

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DR Horton -- >>> Today's Market News To Trade On: 5 Stocks Moving On News




January 30, 2013

http://seekingalpha.com/article/1143021-today-s-market-news-to-trade-on-5-stocks-moving-on-news?source=yahoo




Homebuilders

Readers know our opinion on the housing market and the bullish outlook we have for nearly all things related to housing. With the recent news that home sales were down not due to a lack of interest in purchasing housing but simply due to a lack of supply and inventory coupled with the news yesterday that housing prices continue to rise in the 20 cities in the Case-Shiller 20-City Index doubters have to buy into the bull story here and recognize that we are under built. It took a while to clear out the massive inventory we had built up and get market forces to correct to bring more buyers into the market which also has helped to drive down ratios such as the months of inventory ratios, but now we are in that proverbial sweet spot for homebuilders where there have not been enough homes built in the past few years to keep up with the natural rate of growth which is now rushing to the market to buy. This is why we are seeing such strong numbers at homebuilders and DR Horton (DHI) is a direct beneficiary of this.

The company reported earnings which more than doubled with orders up almost 40%. Even more bullish is the fact that the company's contract backlog now sits at $1.76 billion after rising 80%. The company is the largest homebuilder in the US by volume and is a great proxy for how the entire market is doing as they have the exposure to the entry level which helps us see how these new entrants to the market view the economy. Remember, for the rest of the housing market to do well it is required that a strong first time or entry level market exist to allow others to sell their homes in order to upgrade.

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