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) and PulteGroup (PHM).
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), 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) went to $7.50 from $6.50. Lennar's (LEN) moved to $18 from $14.50, while MDC Holdings' (MDC) inched up to $20 from $18. Pollard raised his target on Meritage Homes (MTH) to $23 from $18, and increased Ryland Group's (RYL) 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.
Select the service that is right for you!
COMPARE ALL SERVICESAction Alerts PLUS
TRY IT FREEJim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
Product Features:
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Dividend Stock Advisor
TRY IT FREENew! $49.95/yr
Jim Cramer's protege, 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
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Stocks Under $10
TRY IT FREEDavid Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
Product Features:
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
- Weekly roundups
Real Money
TRY IT FREE24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
Product Features:
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
Real Money Pro
TRY IT FREEAll 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.
Product Features:
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Options Profits
TRY IT FREEOur options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
Product Features:
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV
