Below you can find the list of 5 best homebuilder/housing stocks to buy now. For our detailed discussion as well as a more comprehensive list please see 11 Best Homebuilder/Housing Stocks To Buy Now.
5. Carrier Global Corporation (CARR)
Number of Hedge Funds: 49
Total Value of HF Holdings: $1.9 billion
Carrier shares tripled since the middle of April, whereas its parent company’s shares have been pretty much flat. There were a total of 49 hedge funds with bullish CARR positions at the end of September. Southeastern Asset Management has been a happy shareholder but sold out of the stock a little bit early in our opinion. Here is what they said in their Q3 investor letter:
“Carrier (23%, 0.83%), the heating, ventilation and air conditioning (HVAC) and security company, was also a top performer. We added to our position in Carrier when it spun out of United Technologies early last quarter, as it traded at less than half of our appraisal and a 7x trailing P/E against similar competitors that were trading at 13-17x. Carrier CEO David Gitlin and the rest of the management team have done great work in a very difficult situation to preserve cash, deleverage and position the business for a strong rebound as lockdowns eased. Carrier’s share price almost doubled over a period of months, and we exited the position in the quarter as it traded through our appraisal.”
4. Lennar Corporation (LEN)
Number of Hedge Funds: 60
Total Value of HF Holdings: $1.74 billion
Lennar ranks 4th in our list of the best homebuilder stocks to buy now. Third Avenue said the following about Lennar recently:
“Lennar Corp. (a leading US homebuilder), which is one of the largest installers of solar panels in North America with more than 8,500 deliveries last year, as well as one of the largest purchasers of efficient Energystar® appliances.”
Solar energy stocks moved up sharply this week after Georgia delivered the Senate to the Democrats. LEN shares moved up a little bit but clearly the market participants don’t consider LEN as a major solar stock.
Follow Lennar Corp W (NYSE:LEN, LEN.B)
Follow Lennar Corp W (NYSE:LEN, LEN.B)
3. D.R. Horton, Inc. (DHI)
Number of Hedge Funds: 62
Total Value of HF Holdings: $2.14 billion
DHI is Mark Tepper’s top homebuilder pick. Tepper stated that first-time buyers will suit D.R. Horton’s specialty which is affordable entry-level homes, that actually meet the 3 major trend criteria he mentioned. “The number one thing you need when you build a house is the land to build it on and D.R. Horton’s land strategy really helps them,”. Hedge funds also agree with Tepper. There were a total of 62 hedge funds with bullish DHI positions. Hedge funds don’t talk about DHI in their investor letters much, but they sure like the stock.
Follow Horton D R Inc (NYSE:DHI)
Follow Horton D R Inc (NYSE:DHI)
2. The Home Depot, Inc. (HD)
Number of Hedge Funds: 73
Total Value of HF Holdings: $4.96 billion
Shares of Home Depot initially plunged in March but investors quickly recognized the fact HD will actually benefit from the current environment. HD quickly recovered its loses and climbed above $290. That’s when analysts started to get nervous about the stock. In September Oppenheimer’s Brian Nagel said that HD and LOW are due for a post-pandemic reset after their recent sales surge. His firm lowered its price target for Home Depot and Lowe’s and changed their ratings to perform from outperform. Home Depot’s price target was lowered to $305 from $320 and Lowe’s to $180 from $185. Since then LOW performed better than HD, but both stocks underperformed the market.
Follow Home Depot Inc. (NYSE:HD)
Follow Home Depot Inc. (NYSE:HD)
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.
