In this article, we will take a look at the 10 best residential construction stocks to buy.
News from the US Residential Construction
On February 18, Reuters reported that the US homebuilder sentiment dropped to a five-month low in February. While new home construction is heavily dependent on imported materials such as lumber, there are concerns regarding tariffs on imports as well as higher mortgage rates further bringing housing costs higher. NAHB Chief Economist Robert Dietz reiterated the concerns, stating
“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs”
Sheryl Palmer, Taylor Morrison CEO, joined CNBC’s ‘Closing Bell Overtime’ to shed light on the housing market amidst weak builder confidence and slowing activity. According to her, the first-time buyer is still stretched. Regarding tariffs, she deemed the situation still uncertain but referred to them as something that will have an impact and will be ‘unfortunate’ since affordability is stretched and this certainly won’t help.
Previously, Ivy Zelman, Zelman and Associates Executive Vice President appeared on CNBC, saying the spring selling season is not yet a disaster but is off to a soft start. Alongside, the risk of inflation from tariffs and the deportation risk which is a concern for construction workers could put more inflation in labor is there. Simultaneously, builders do not have pricing power and hence, they are resorting to offering concessions.
Now that we have looked at the residential construction market, let’s move to the 10 best residential construction stocks to buy.
Aerial view of a real estate complex with several residential lots under construction.
Our Methodology
In order to compile a list of the 10 best residential construction stocks to buy, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best residential construction stocks to buy have been arranged in ascending order of their hedge fund holders, as of Q4 2024.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Champion Homes, Inc. (NYSE:SKY)
Number of Hedge Fund Holders: 24
Champion Homes, Inc. (NYSE:SKY) serves as one of the largest modular homebuilders in North America. The company has over 70 years of experience in building manufactured housing. It has 48 manufacturing facilities throughout the United States and western Canada.
The business strategies of Champion Homes, Inc. (NYSE:SKY) are proving to sustain its market leadership position. Other than pursuing organic and acquisition strategies, the company is enhancing the customer’s digital experience by enabling them to design, shop, and price homes online. It is also investing in production automation technology to improve product yield and quality. Furthermore, the market demographic trends seem to align in the company’s favor since 60% of the US population cannot afford a traditional home. Millennials and baby boomers are the fastest-growing age segments while accounting for 70% of manufactured home sales.
For the third quarter of fiscal 2025, Champion Homes, Inc. (NYSE:SKY) saw its net sales rise 15.3% to $644.9 million and earnings per diluted share increase 30.9% to $1.06, compared to the third quarter of fiscal 2024. Due to increased demand across all sales channels, US homes sold rose 14.1% to 6,437. The homebuilder remains confident in its strategy of accelerating product innovation, investing in technology, and expanding its retail and digital presence.
9. Cavco Industries, Inc. (NASDAQ:CVCO)
Number of Hedge Fund Holders: 32
Cavco Industries, Inc. (NASDAQ:CVCO) is one of the largest producers of modular and manufactured homes in the United States. The company produces and designs factory-built housing products. Cavco operates in the segments, Factory-Built Housing and Financial Services.
Cavco Industries, Inc. (NASDAQ:CVCO) has built a decades-old legacy for itself and has been shaping the manufactured home industry as a leader in innovation and construction techniques. For six decades, it has been bringing high-quality, luxurious homes to buyers while acquiring the status of one of the largest producers of manufactured homes in the market while half a million American families have enjoyed a Cavco manufactured home. The company has some of the recognized brand names in the industry including Fleetwood Homes, Palm Harbor Homes, Nationwide Homes, Fairmont Homes, Friendship Homes, Chariot Eagle, and Destiny Homes.
For the third quarter of fiscal 2025, Cavco experienced its net revenue go up by 16.8% as compared to the prior year, driven by higher factory-built housing volume as well as a strong recovery in financial services. Within the factory-built housing segment, net revenue was up 17.3% year-over-year. Simultaneously, the financial services segment’s net revenue rose on higher insurance premiums.