In this article, we discuss 5 best home builder stocks to buy now. If you want to see more stocks in this selection, check out 10 Best Home Builder Stocks To Buy Now.
5. Advanced Drainage Systems, Inc. (NYSE:WMS)
Number of Hedge Fund Holders: 26
Advanced Drainage Systems, Inc. (NYSE:WMS) was incorporated in 1966 and is headquartered in Hilliard, Ohio. The company designs, manufactures, and markets thermoplastic corrugated pipes, water management products, and drainage solutions for underground construction in the United States, Canada, Mexico, and internationally. The company offers its products for non-residential, residential, agriculture, and infrastructure applications. It is one of the best home builder stocks to buy now.
Baird analyst Michael Halloran on August 5 raised the price target on Advanced Drainage Systems, Inc. (NYSE:WMS) to $170 from $119 and maintained an Outperform rating on the shares. The analyst said underlying demand remains resilient, with solid volumes expected through 2023 helped by high backlog levels, market share gains, capacity additions, and a suitable end market mix potentially supporting 2024 revenue growth. On August 17, Deutsche Bank analyst Joe Ahlersmeyer initiated coverage of Advanced Drainage Systems, Inc. (NYSE:WMS) with a Buy rating and a $182 price target.
According to Insider Monkey’s data, 26 hedge funds were bullish on Advanced Drainage Systems, Inc. (NYSE:WMS) at the end of June 2022, up from 23 funds in the prior quarter.
Here is what ClearBridge Mid Cap Growth Strategy Fund has to say about Advanced Drainage Systems, Inc. (NYSE:WMS) in its Q2 2022 investor letter:
“While IT is traditionally considered the bastion of growth opportunities and continues to remain our largest absolute weighting in the portfolio, only three of the portfolio’s top 10 performers this quarter were in IT, with select names in the cyclical industrials and defensive health care sectors among the leading contributors. These included a new addition Advanced Drainage Systems (NYSE:WMS) in the industrial sector. Advanced Drainage Systems manufactures and markets thermoplastic pipes, water management products and drainage solutions for use in construction and infrastructure. We believe Advanced Drainage Systems will benefit from a progression within the construction industry away from concrete toward recycled plastic; it also has a deep competitive moat as the only plastic player of scale.”
4. Carlisle Companies Incorporated (NYSE:CSL)
Number of Hedge Fund Holders: 30
Another notable home building stock to consider is Carlisle Companies Incorporated (NYSE:CSL), an Arizona-based diversified manufacturer of engineered products. The Carlisle Construction Materials segment manufactures single-ply roofing products, rigid foam insulations, spray polyurethane foam, architectural metal products, waterproofing products, and air and vapor barrier systems for commercial, industrial, and residential buildings. On August 4, Carlisle Companies Incorporated (NYSE:CSL) declared a $0.75 per share quarterly dividend, a 38.9% increase from its prior dividend of $0.54. The dividend was paid on September 1.
On October 14, Credit Suisse analyst Daniel Oppenheim upgraded Carlisle Companies Incorporated (NYSE:CSL) to Outperform from Neutral with a $363 price target. Oppenheim expects Carlisle Companies Incorporated (NYSE:CSL) to be a beneficiary of the positive secular trend of higher building efficiency, which should add to demand for its commercial roofing and waterproofing offerings, the analyst told investors in a research note. He believes Carlisle Companies Incorporated (NYSE:CSL) provides attractive secular growth in a backdrop consisting of slowing demand in building products.
According to Insider Monkey’s Q2 data, 30 hedge funds were long Carlisle Companies Incorporated (NYSE:CSL), compared to 29 funds in the prior quarter. David Blood and Al Gore’s Generation Investment Management is the leading position holder in the company, with 1.7 million shares worth $408 million.
Here is what Polen Global Growth has to say about Carlisle Companies Incorporated (NYSE:CSL) in its Q2 2022 investor letter:
“CSL’s recent update indicated that the worst COVID-19 impacts on the business are likely past, with plasma collections now snapping back. CSL’s core business continues to enjoy significant competitive advantages, in our view, and, as collected plasma is processed into finished products, we believe sales will return to their pre-COVID-19 levels. It will take time for this to play out, but it is a welcome improvement. Most of the other segments of the business are performing well, and steady demand for CSL’s products, which are less economically sensitive, has likely contributed to the stability of shares recently.”
3. Owens Corning (NYSE:OC)
Number of Hedge Fund Holders: 32
Owens Corning (NYSE:OC) was incorporated in 1938 and is headquartered in Toledo, Ohio. The company manufactures and markets insulation, roofing, and fiberglass composite materials in the United States, Canada, Europe, the Asia Pacific, and internationally. On September 15, Owens Corning (NYSE:OC) declared a $0.35 per share quarterly dividend, in line with previous. The dividend is payable on November 3, to shareholders of record on October 17. Owens Corning (NYSE:OC) is one of the premier home building stocks to buy now.
On October 10, investment advisory Citi raised the price target on Owens Corning (NYSE:OC) to $91 from $90 and reiterated a Neutral rating on the shares. Analyst Anthony Pettinari issued the ratings update.
According to Insider Monkey’s data, 32 hedge funds were bullish on Owens Corning (NYSE:OC) at the end of Q2 2022, up from 26 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the leading position holder in the company, with nearly 2 million shares worth $142.2 million.
Here is what ClearBridge Investments has to say about Owens Corning (NYSE:OC) in its Q1 2021 investor letter:
“Roofer and insulator Owens Corning, also a ClearBridge holding, is helping make the building sector more sustainable. The company operates across 33 countries and has positive environmental impact primarily through its insulation business. In the EU, for example, buildings are responsible for 40% of energy consumption and 36% of GHG emissions. New buildings consume only half of the energy of those built over 20 years ago, according to the company. But as 85% of the buildings in the EU are older than 20 years, and 85%–95% of them are expected to still be standing in 2050, there is need for a massive renovation. Roughly 35 million buildings in the EU will need to be renovated by 2030, according to the company.
Properly insulated homes lower energy intensity and thus the overall carbon footprint of a home. According to Owens Corning, insulation intensity of new homes is on the rise, driven in part by state and municipal rules requiring certain levels of insulation, but also by consumer preference for reducing energy consumption and being greener in the home. The company is helping meet this demand with insulation products that are lighter weight yet deliver stronger performance than higher-weight/higher-density products. The insight that greater density does not necessarily mean better performance has allowed the company to reduce shipping weight and fuel.
Owens Corning’s roofing business also features shingles that use a highly reflective granule technology to reflect the sun, keep roofs cooler and lower air conditioning energy demand. Its composites business also counts wind turbines as a major end use, another positive for sustainability goals.
As part of its 2030 Sustainability Goals, Owens Corning is also looking to grow a circular economy model in which virgin raw materials, waste, energy and emissions are minimized through intelligent design, renewable and recycled input and energy-efficient production.”
2. Vulcan Materials Company (NYSE:VMC)
Number of Hedge Fund Holders: 34
Vulcan Materials Company (NYSE:VMC) is an Alabama-based company that produces and supplies construction aggregates primarily in the United States. It operates through four segments – Aggregates, Asphalt, Concrete, and Calcium. On September 30, Vulcan Materials Company (NYSE:VMC) raised its guidance for adjusted EBITDA to $2.7 billion-$3 billion, from its prior 2022 EBITDA guidance of $1.7 billion. On October 14, Vulcan Materials Company (NYSE:VMC) declared a quarterly dividend of $0.40 per share, in line with previous. The dividend is payable on December 5, to shareholders of record on November 15.
On October 12, DA Davidson analyst Brent Thielman maintained a Buy rating on Vulcan Materials Company (NYSE:VMC) but lowered the price target on the shares to $200 from $205. The analyst added that his discussions with various non-residential exposed contractor suppliers suggest that positive pipelines into 2023 “lend cautious optimism” for Vulcan Materials Company (NYSE:VMC).
According to Insider Monkey’s data, 34 hedge funds were bullish on Vulcan Materials Company (NYSE:VMC) at the end of June 2022, compared to 36 funds in the prior quarter. Sharlyn C. Heslam’s Stockbridge Partners is the leading stakeholder of the company, with 2 million shares worth $286.4 million.
Here is what Weitz Investment Management Partners Value Fund has to say about Vulcan Materials Company (NYSE:VMC) in its Q4 2021 investor letter:
“Vulcan Materials contributed to returns due to solid results and a bright outlook for the company’s prosaic, essential products. Aggregate volumes and backlogs are strong across end markets, pricing momentum is robust, and the federal infrastructure bill adds visibility into the amount of money that will be allocated to infrastructure projects.”
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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