This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Homebuilder Stocks to Watch in 2010

NEW YORK ( TheStreet) -- Homebuilding quiz: How many of the public homebuilders can virtually guarantee reaching profitability in 2010?

The answer: one, and only one.

Sad to say, but when it comes to forecasting profitability in 2010, one is the loneliest number in the homebuilding sector.

Indeed, the level of uncertainty is so great when it comes to the homebuilding stocks headed into 2010 that only NVR (NVR - Get Report) can be expected to turn a profit in 2010.

Considering that NVR is the only homebuilder to turn a profit in consecutive quarters -- many of them, actually -- it is not going out on much of a limb to make this call for 2010.

What has allowed NVR to separate itself from the woeful homebuilding sector?

Carl Reichardt, an analyst with Wells Fargo said the reason for NVR's massive outperformance of the sector over the past two years is, for one, the fact that the homebuilder doesn't own land, but only options on land, so when the downturn came NVR was not forced to writedown a substantial portion of assets. NVR also is concentrated in the northeast and Washington D.C., and lacks exposure to the worst housing markets out West.

The second key component of the NVR strategy is the vertical integration of its business. NVR has significant control over building materials, logistics and its building network, and that allows NVR to be much more efficient than peers, Reichardt noted. "The margin on the house itself is what they earn as opposed to [the margin] on the land, and that is the key," he said.

Still, at $692, is NVR a buy? It's by far the most expensive stock in the homebuilding sector. NVR has been trending up all year, though it is still off a 52-week high of $742. Wells Fargo's Reichardt has his price target in the mid-$800 range, so he thinks that relative to NVR's historic valuation, the shares are inexpensive.

"NVR has outperformed massively in the past two years, and can still outperform this year," said Joel Blocker, analyst with FBN Securities.

Still, not all analysts are as bullish on NVR, given the price point. James Wilson, an analyst at JMP Securities, said NVR is fairly expensive. "NVR has never lost money, and it's a great business. It's a well run company with a high return on capital, if you could get it cheaper," Wilson said.

Whether NVR is priced to buy or not, some analysts are clear on one point: "No one will be profitable in 2010 except for NVR," said Well Fargo's Reichardt.

But what of the others? Read on....
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DHI $30.65 0.23%
NVR $1,569.13 0.59%
TOL $36.89 0.88%
AAPL $109.50 -1.16%
FB $92.47 0.08%


Chart of I:DJI
DOW 17,050.75 +138.46 0.82%
S&P 500 1,995.83 +15.91 0.80%
NASDAQ 4,810.7880 +19.6360 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs