Builders' Stocks: Too Cheap Not to Own
D.R. Horton (DHI) reported decent numbers Wednesday, and most importantly, its unit orders were up 28%. However, the bears are not writing about these orders the same way they commented on Toll's (TOL). Horton delivered 50,000 homes, compared with 9,000 for Toll. Now, you tell me what's happening in the housing market.
I don't think that many investors, not even the sell-side analysts, are aware that what really happened at Toll was a management mistake. They simply filled out existing communities too quickly last year. That maneuver gave them monster numbers then, but is a big problem today. Don't base your opinion of a $200 billion industry on Bob Toll's comments. Look at the entire group.
Hmmm. Horton orders up 28%, Beazer (BZH) up 15%, Hovnanian (HOV) up 38% and Pulte (PHM) up 20%. What am I missing? Seems as if most of the large public builders are managing the current slowdown just fine.
I know that the real estate bull market is over. I have been incorrectly forecasting this for five quarters now. It's about time. Housing demand and prices have flattened. But if you keep reporting that as news, you need to buy a clue.But, just as with the steel sector, high-quality housing stocks can trade up big in a soft landing. Don't get bummed by the incessant bearishness of the sound-bite shorts. The sector is too cheap not to own. Once again, if the sector implodes, the builders have index-type downside. If it undergoes a soft landing, another big trade into spring.
Marcin vs. CramerObviously, Jim Cramer and I disagree on the homebuilders. I had sold them into the "land bank" run, but repurchased them recently after their big decline. However, our disagreement is more fundamental than that. He says to follow the stock-price action, and I say follow valuations and fundamentals. I have made an entire career out of buying stocks that are dropping big to cheap valuations, with good fundamentals.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV