We recently compiled a list of the 10 Best Home Builder Stocks To Buy Now. In this article, we are going to take a look at where Champion Homes, Inc. (NYSE:SKY) stands against the other home builder stocks.
Lowering Mortgages: A Sigh of Relief for the Housing Market?
Mortgage rates have dropped for six straight weeks to their lowest since February 2023 as the 30-year fixed-rate mortgage averaged 6.20% in the week ended September 12. While many experts believe that these rates will be in the 5% range by 2025, the gesture seems to be motivating for all those looking to buy a house but have long been priced out of the market. In an interview with CNBC, Bess Freedman, CEO of Brown Harris Stevens, mentioned how the anticipated Fed rate cut could be beneficial for the housing market but its effect would unfold gradually. The long-awaited move is also likely to help sellers escape the mortgage lock-in effect and finally put their houses on the market. The mortgage lock-in effect refers to existing homeowners holding onto their houses since they will have to pay a higher rate on a new house.
Diane Swonk, KPMG chief economist, talked about the downside of this positive news with CNBC saying that it couldn’t spur buyer activity a lot. In the existing housing market, there is a lot of pent-up demand especially with 12,000 millennials a day turning 35 and moving into their peak home-buying years. Many buyers are still waiting for mortgage rates to go even lower in the hopes of the Fed rate cut. Other than that, home affordability being at its worst since 2006 is further pushing out potential buyers. The root cause in this case remains decades of under-building which has restricted the prevailing supply. According to Swonk, the US zoning laws need to be rethought to solve this housing crisis
Therefore, homebuyers and homeowners in the current tight housing market tend to see a welcome sign in the form of lowering mortgage rates ahead of the rate cuts from the Federal Reserve. However, the market continues to be plagued with persistent supply shortages and affordability issues.
Our Methodology:
In order to compile a list of the 10 best home builder stocks to buy now, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best home builder stocks to buy now have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close up of the exterior of a factory-built home.
Champion Homes, Inc. (NYSE:SKY)
Number of Hedge Fund Holders: 28
Champion Homes, Inc. (NYSE:SKY) serves as one of the biggest homebuilders in North America. The company has over 70 years of experience in building manufactured housing. It has 48 manufacturing facilities throughout the United States and western Canada. Apart from the core home-building business, the firm provides construction services for installing and setting up factory-built homes. It operates a factory-direct retail business with 72 US retail locations while offering transportation services to manufactured housing and other industries.
The business strategies of Champion Homes, Inc. (NYSE:SKY) are proving to sustain its market leadership position. Other than pursuing organic and acquisition strategies, the company is enhancing the customer’s digital experience by enabling them to design, shop, and price homes online. It is also investing in production automation technology to improve product yield and quality. Furthermore, the market demographic trends seem to align in the company’s favor since 60% of the US population cannot afford a traditional home. Furthermore, millennials and baby boomers are the fastest-growing age segments while accounting for 70% of manufactured home sales.
For the first quarter of fiscal 2025, the company saw growing sales and backlog which reflected an increase in demand for its homes. Net sales increased 35.1% year-over-year. The home builder had $548.9 million of cash and cash equivalents, as of June 29, with an increase of $53.9 million in the current quarter.
The home builder’s dominant position in North America, industry-leading family of brands, investments in growth strategies, and material financial results make it promising. As of 2024’s second quarter, the stock is held by 28 hedge funds and ranks 9th among the 10 best home builder stocks to buy now. MAK Capital One is the largest shareholder in the firm.
Overall SKY ranks 9th on our list of the best home builder stocks to buy. While we acknowledge the potential of SKY as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SKY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
