5 Best Home Builder Stocks To Buy Now

1. Builders FirstSource, Inc. (NYSE:BLDR)

Number of Hedge Fund Holders: 53

Builders FirstSource, Inc. (NYSE:BLDR) is one of the best home builder stocks to consider. The company manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the United States. 

On August 3, Stifel analyst Stanley Elliott raised the price target on Builders FirstSource, Inc. (NYSE:BLDR) to $92 from $87 and maintained a Buy rating on the shares after updating his estimates to factor in the Q2 beat and expectations for continued strength in the second half. While the analyst acknowledges that housing activity has softened and this will impact sales and margins in 2023, he expects Builders FirstSource, Inc. (NYSE:BLDR) to generate meaningful free cash flow and utilize it for share buybacks and M&A.

According to Insider Monkey’s Q2 data, 53 hedge funds were long Builders FirstSource, Inc. (NYSE:BLDR), compared to 57 funds in the prior quarter. Coliseum Capital is the largest stakeholder of the company, with 6.46 million shares worth $347 million. 

Here is what Black Bear Value Fund has to say about Builders FirstSource, Inc. (NASDAQ:BLDR) in its Q2 2022 investor letter:

“Builders FirstSource is a supplier and manufacturer of building materials for professional homebuilders, subcontractors, remodelers, and consumers. Their products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows and custom millwork.

The fundamental discussion about homebuilders applies to BLDR. As more homes are built across the country, there will be an increased need for scaled sourcing of products to homebuilders. There is a large amount of fragmentation in the supply chain which provides BLDR a long runway for acquisitions and realistic synergies.

BLDR should be able to generate $7-$10 a share in cash in the medium term with significant upside if they can scale through acquisition and/or further penetrate existing markets. We own it at a 13-19% free-cash flow yield so little growth is needed for us to compound value at high rates.”

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