5 Best Homebuilder/Housing Stocks To Buy Now

1. Lowe’s Companies, Inc. (LOW)

Number of Hedge Funds: 83

Total Value of HF Holdings: $6.56 billion

LOW is by the most popular housing stock among hedge funds. Here is how Brown Advisory explained the initial jump in LOW’s stock price during the second quarter:

“Home improvement retailer Lowe’s Companies jumped after a surge in home improvement project spending drove higher-than-expected quarterly results. While the company’s sales results may moderate through the remainder of the year, Lowe’s has an opportunity to improve its margins and gain market share from smaller rivals over the next several years as it improves its in-store and online capabilities.”

Bill Ackman explained why he liked LOW better than HD in his Q2 investor letter:

In recent quarters, Lowe’s management has begun to acknowledge its medium-term 12% operating margin target as “not the end point,” but rather “a stop along [Lowe’s] journey,” and has further noted that they believe Lowe’s “can do better than that over time.” As Lowe’s revenue productivity and margins begin to approach its best-in-class peer Home Depot, which achieved a greater than 14% profit margin last year, it will generate significant increases in profit, which, when coupled with the company’s likely soon-to-be-relaunched, large share repurchase program should lead to accelerated future earnings-per share growth.

Despite Lowe’s significant stock price appreciation, it currently trades at approximately 19 times our estimate of Lowe’s next-twelve-month earnings (vs. Home Depot at 25 times), a valuation which does not reflect its potential for significant future profit improvement. As a result, we believe that Lowe’s share price has the potential to appreciate substantially as the company continues to make progress on its business transformation.”

Please also see 19 Largest Construction Companies In The World and 10 Best Growth Stocks To Buy Now.

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