Playing Housing With The Blackstone Group L.P. (BX), Howard Hughes Corp (HHC) & Toll Brothers Inc (TOL)

Still pounding the table

Forgive me for pounding the table on Toll Brothers Inc (NYSE:TOL), but I think it is still the best homebuilder going forward. Its sales of high end condos, homes, golf courses, and country clubs won’t be affected by less affluent applicants’ credit ratings or a possibly troubled first home buyer market in the years to come.

Like the other two stocks listed, this one has management skin in the game, with the co-founding Toll Brothers Inc (NYSE:TOL) holding over 10 million shares. Although it doesn’t currently pay a dividend it’s generating enough cash per share for investors to believe that that may change one day.

This isn’t a name to wait too long to buy. The P/E has risen to 12.61 and the PEG is rising, now at 1.11. The stock is trading close to the median price target of $38.00. Its past five years’ growth rate was 45.16%, but is decelerating to 44.16% for the next five years. However, at 44% I’ll take deceleration any day of the week and twice on Sunday open houses.

Barclays must agree because it did a 180 degree turn on Toll Brothers Inc (NYSE:TOL), giving it an Underweight in February and upgrading to Overweight on April 22. The return on equity is good at 17.21% and the profit margin stands at 24.90%. One thing to be aware of is that the short interest has grown by almost 50% to 7.20% since March as the stock moves higher.

In closing

For yield the go-to name is Blackstone. It’s not just a housing play, either, but with such diverse operations requires detailed due diligence. I think Tilson and Ackman are right on the money about Howard Hughes Corp (NYSE:HHC), having seen some of the properties in person and coming away quite impressed. This one may be poised to jump once more analysts cover it. I’ve liked Toll Brothers Inc (NYSE:TOL) and would love a pullback, but it just seems that may not happen.

The article Three Housing Plays to Hold Forever originally appeared on Fool.com and is written by AnnaLisa Kraft.

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