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 Taylor Morrison Home Corporation (NYSE:TMHC) 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).
A residential home with a white picket fence, showcasing the high standards of construction.
Taylor Morrison Home Corporation (NYSE:TMHC)
Number of Hedge Fund Holders: 44
Taylor Morrison Home Corporation (NYSE:TMHC) is one of the leading American homebuilders which has operations across 20 markets in 12 states and caters to the needs of diverse consumers including first-time, move-up, and resort lifestyle homebuyers and renters. The company’s financial services segment offers mortgage financing, title services, and homeowners’ insurance.
The leading national land developer and homebuilder has a company legacy that dates back over 100 years. The home builder favors from an attractive national footprint spanning some of the highest-growth markets and prime locations across the US. This concentration in prime locations enhances its portfolio’s through-the-cycle resiliency. Alongside a leading national, regional, and local scale, the homebuilder continues to benefit from a diverse portfolio serving consumers across the homebuyer spectrum while its buyers tend to be well-qualified with financial flexibility.
Taylor Morrison Home Corporation (NYSE:TMHC) closed 2024 with a strong fourth quarter, with home closings revenue up 12% year-over-year and adjusted earnings per diluted share up nearly 30% year-over-year. Sheryl Palmer, Taylor Morrison CEO and Chairman, reiterated the firm’s progress in 2024 by stating:
“This quarter’s results capped off another milestone year for our organization, in which we met or exceeded each of the long-term goals we laid out in early 2024. This included 12% closings growth, which was well ahead of the 4% increase contemplated in our initial guidance heading into the year and our 10% average growth target.”
Overall, TMHC ranks 5th on our list of best residential construction stocks to buy. While we acknowledge the potential of TMHC 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 TMHC 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.
