10 Best Undervalued Stocks To Buy Now

7. PulteGroup, Inc. (NYSE:PHM)

Forward PE as of June 24: 11.6

Number of Hedge Fund Holders: 39

PulteGroup, Inc. (NYSE:PHM) is a Georgia-based company that is primarily focused on acquiring and developing land and constructing housing on said lands. It is one of the largest homebuilders in the United States. At the end of Q1, 39 hedge fund managers were long on PulteGroup, Inc. (NYSE:PHM), with stakes worth $1.67 billion according to Insider Monkey’s database. As of March 31, Greenhaven Associates is the most dominant shareholder in the company and has a position worth $684.014 million.

PulteGroup, Inc. (NYSE:PHM) has consistently demonstrated its commitment to strategic expansion and operational enhancement. Since 2021, the company’s operating teams have allocated approximately $14 billion towards land acquisition and development initiatives and plans to further invest $5 billion throughout 2024. Importantly, the first-quarter land spend is according to the company’s annual target, as the company remains committed to achieving annual unit volume growth ranging from 5% to 10%.

Moreover, an important aspect of PulteGroup, Inc.’s strategy lies in its land management practices, with 51% of its land holdings structured through options. The company aims to increase this metric to 70%. This strategy involves using land options, which are agreements that give the company the right, but not the obligation, to purchase land at a later date. By utilizing options instead of outright purchasing land, the company reduces the capital required upfront which decreases the capital intensity of the company’s land portfolio. This flexibility not only reduces financial risks but also helps PulteGroup to streamline its operational efficiency by selectively going after economically viable development projects.

Should you buy PHM at current prices? The stock is trading at a forward PE of 8.6, a 43% discount to its sector. PHM is attractive at current levels considering analysts expect the company’s earnings to grow by 11% this year. The stock has gained 35% over the past 12 months and the Street-median price target implies a further upside of 18%, as of June.