This Day On The Street
Continue to site
ADVERTISEMENT
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

Stay Away From Homebuilder Rally, Goldman Sachs Says

BOSTON ( TheStreet) -- The housing industry is healing, but Goldman Sachs analysts recommend that investors steer clear of the rally in homebuilders such as Lennar (LEN - Get Report) and PulteGroup (PHM - Get Report).

The SPDR S&P Homebuilders (XHB) ETF has risen more than 30% over the past three months. Even JPMorgan Chase (JPM) CEO Jamie Dimon said "housing is at or near the bottom" during an interview on CNBC Monday afternoon.

Not so fast, says Goldman Sachs analyst Joshua Pollard. While the housing sector may be gaining its footing, the improvements are lagging valuations.

"With homebuilding stocks outperforming the market by 3,500 basis points in the last three months, we would wait for a pullback or a clearer picture that housing is healing quicker than it currently is," Pollard writes.

Among homebuilders, Pollard says his team at Goldman prefers PulteGroup because of its turnaround story as well as Toll Brothers (TOL - Get Report), which he calls best in class. Pollard increased his price target on Pulte to $8, an increase of 23% from his previous target, and he raised his target on Toll by 9% to $24.

Pollard also hiked his price targets for several other homebuilders. The price target on KB Home (KBH - Get Report) went to $7.50 from $6.50. Lennar's (LEN - Get Report) moved to $18 from $14.50, while MDC Holdings' (MDC - Get Report) inched up to $20 from $18. Pollard raised his target on Meritage Homes (MTH - Get Report) to $23 from $18, and increased Ryland Group's (RYL - Get Report) to $13 from $11, although he maintained a "sell" rating on Ryland.

-- Written by Robert Holmes in Boston.



>To contact the writer of this article, click here: Robert Holmes.

Readers Also Like:


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
KBH $15.63 0.00%
LEN $48.58 0.00%
MDC $27.93 0.00%
MTH $47.39 0.00%
PHM $22.19 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs