We recently published a list of 10 Best Residential Construction Stocks to Buy. In this article, we are going to take a look at where PulteGroup, Inc. (NYSE:PHM) stands against other best residential construction stocks to buy.
News from the US Residential Construction
On February 18, Reuters reported that the US homebuilder sentiment dropped to a five-month low in February. While new home construction is heavily dependent on imported materials such as lumber, there are concerns regarding tariffs on imports as well as higher mortgage rates further bringing housing costs higher. NAHB Chief Economist Robert Dietz reiterated the concerns, stating
“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs”
Sheryl Palmer, Taylor Morrison CEO, joined CNBC’s ‘Closing Bell Overtime’ to shed light on the housing market amidst weak builder confidence and slowing activity. According to her, the first-time buyer is still stretched. Regarding tariffs, she deemed the situation still uncertain but referred to them as something that will have an impact and will be ‘unfortunate’ since affordability is stretched and this certainly won’t help.
Previously, Ivy Zelman, Zelman and Associates Executive Vice President appeared on CNBC, saying the spring selling season is not yet a disaster but is off to a soft start. Alongside, the risk of inflation from tariffs and the deportation risk which is a concern for construction workers could put more inflation in labor is there. Simultaneously, builders do not have pricing power and hence, they are resorting to offering concessions.
Our Methodology
In order to compile a list of the 10 best residential construction stocks to buy, 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 residential construction stocks to buy have been arranged in ascending order of their hedge fund holders, as of Q4 2024.
“Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Construction workers laying bricks during the residential development of multiple lots.
PulteGroup, Inc. (NYSE:PHM)
Number of Hedge Fund Holders: 40
PulteGroup, Inc. (NYSE:PHM) is one of the largest homebuilders in the US with operations in over 40 major cities. It was founded in 1950 and has delivered almost 750,000 homes across the country. The homebuilder caters to first-time, move-up, and active-adult homebuyers through its brands Pulte, Centex, Del Webb, DiVosta, American West, and John Wieland Homes and Neighborhoods.
PulteGroup, Inc. (NYSE:PHM) boasts a strong operating platform that remains diversified enough across the major homebuying markets, giving it opportunities for growth. With a unique multi-branded approach to the market, the homebuilder has an unmatched ability to serve all buyer groups. As the nation’s third largest builder, Pulte continues to penetrate new markets while it favors from operating in an undersupplied market.
Pulte’s strong financial and operating performance enabled it to invest more than $13 billion into its business since 2015. Recently, the homebuilder closed a record-setting year as it reported its strong fourth quarter of 2024 results. The homebuilder posted nearly $18 billion in revenues and net income of $3.1 billion for the full year. Pulte deemed itself well-positioned for the upcoming spring selling season through its targeted sales incentives as well as faster construction cycle times resulting in a sales backlog and inventory in process.
Overall, PHM ranks 6th on our list of best residential construction stocks to buy. While we acknowledge the potential of PHM 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 time frame. If you are looking for a deeply undervalued AI stock that is more promising than PHM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
