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 Tri Pointe Homes, Inc. (NYSE:TPH) 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).
An aerial view of a neighborhood, showing newly constructed homes in a cul-de-sac.
Tri Pointe Homes, Inc. (NYSE:TPH)
Number of Hedge Fund Holders: 37
Tri Pointe Homes, Inc. (NYSE:TPH) is one of the largest public homebuilding companies in the US. The home builder has been engaging in the construction of premium homes and communities with deep ties to the communities it serves.
Tri Pointe Homes, Inc. (NYSE:TPH) is a recognized leader in innovative design, energy efficiency, customer experience, and environmentally friendly business practices. TPH serves as a growth company with national reach and local market expertise in addition to a seasoned leadership team known for operational excellence. In 2024, the homebuilder achieved different milestones such as delivering a record-high 6,460 new homes and a 40% rise in diluted earnings per share year-over-year, while closing the year with the strongest balance sheet and liquidity ever.
However, the homebuilder faces challenges from housing affordability and elevated mortgage rates which also resulted in softer seasonal sales in the last part of 2024. The stock was recently downgraded by RBC Capital from Outperform to Sector Perform, based on near-term market headwinds as well as higher promotional incentives and rising land costs pressuring the company’s gross margin. As of the recent fourth quarter 2024 earnings, the firm remained positive for the spring selling season as Tom Mitchell, the President and Chief Operating Officer, said:
‘We are confident that strong long-term fundamentals, including both favorable demographics and the ongoing supply and demand imbalance, position Tri Pointe Homes and our industry for ongoing success ‘
Overall, TPH ranks 8th on our list of best residential construction stocks to buy. While we acknowledge the potential of TPH 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 TPH 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.
