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7 Stocks for a Housing Rebound

MILLBURN, N.J. (Stockpickr) -- There are many indications -- anecdotal and factual -- that the housing market is in the midst of a renaissance after a crushing multiyear depression.

Here are some of those indicators:

>>5 M&A Stocks to Buy at a Bargain

  • Housing starts have been on a steady rise since February 2011 and have registered 700,000 or more since November 2011 (with a minor blip to 697,000 in December 2011).

  • Building permits have to the most part followed the trend in housing starts.
  • The NAHB/Wells Fargo Housing Market Index has surged since September 2011to levels not seen since June 2007. The index gauges builder perception of single-family-home sales and sales expectations for the next six months.
  • New-single-family-home sales bottomed in February 2011 and have risen to a level not seen since April 2010. However, the 2009-2010 single-family-home sales were bolstered by Federal tax credits, which no longer exist.
  • The S&P/Case-Shiller Composite 20 City YOY Index of Home Prices, while still negative, has improved since April 2011
  • Mortgage rates remain at historic low levels and should remain so for several years.

So how can we take advantage of these trends? Here are seven stocks for the housing rebound.

 

USG

USG (USG), known to stock market veterans as US Gypsum, manufacturers building materials for residential and commercial construction, including drywall, panels, roofing and flooring.

The company suffered greatly as a result of the housing crash, but the turnaround has begun. Revenue bottomed in 2010 at $2.9 billion and is expected to rise to $3.4 billion this year and $3.7 billion next year.

The company posted earnings losses consistently since the housing market fell apart, losing as much as $3.32 in 2010. In 2012 the company is expected to lose 68 cents and then turn to profitability, estimated at 25 cents in 2013. That estimate could be low if the construction market continues its rebound.

As of the most recently reported period, USG was one of Warren Buffett's holdings.

Ingersoll-Rand

Ingersoll-Rand (IR) specializes in air conditioning, climate control systems, industrial technologies and off-road vehicles. Its well-known brands include American Standard, Ingersoll Rand, Club Car, Schlage, Trane and Steelcraft.

Since seeing its earnings plunge nearly 50% year over year in 2009 to $1.65, Ingersoll-Rand is beginning to experience a rebound. Earnings growth is expected in 2012 of 7.5% and in 2013 in of nearly 20%.

The stock sells at 13 times current-year earnings and 9 times forward earnings. During the last period of housing growth, Ingersoll-Rand sold for mid-teens times earnings.

Whirlpool

Whirlpool (WHR) is a worldwide manufacturer of home appliances such as washers, dryers, refrigerators, stoves and ovens. The company's brands are literally household names, including Whirlpool, Maytag, KitchenAid, Jenn-Air and Amana.

Whether due to new-home construction or home upgrades after years of neglect, Whirlpool is poised to see a pickup in its business as the housing market reenergizes itself. Sales are expected to be flat in 2012 and rise 4% in 2013. Earnings are expected to rise from $6.47 in 2012 to $8.00 in 2013. The company has recently upped its stake in German kitchen manufacturer Alno.

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