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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why I Like Homebuilders This Fall -- But Hate the ETFs

BALTIMORE (Stockpickr) -- I like homebuilders right now. There, I said it.

Despite the stellar rally homebuiling stocks have pulled off in 2012 and the constant trickle of positive housing data that's been hitting Wall Street so far this year, it still sounds wrong to like homebuilders. Sure, I get it -- investors who owned homebuilding stocks got their teeth knocked in after the housing bubble burst, so a lot of folks are still hesitant to like homebuilding stocks.

Maybe hesitant is an understatement. Let's face it: Most investors were too nervous to buy homebuilders at the start of the year when the housing data started turning, and they're even more nervous now that homebuilding stocks have made such a big run.

>>5 Stocks Everyone Hates - But You Should Love

But I think that those are both bad reasons to ignore homebuilders right now. And I think that a few names in particular are worth buying. More on that in a minute.

First, the data is good. Really good.

Housing starts, the number of new homes builders are laying hammer and nail to, are up 21.5% in the last year. And they're up 56% from the bottom back in the middle of 2009. The nationwide S&P/Case-Shiller Home Price Index has been making a turn higher too, ticking higher since the start of the year, when it looks like it too found a bottom.

And if sentiment is looking down for homebuilders, no one has told them lately. The NAHB/Wells Fargo Housing Market index, a datapoint that measures sentiment homebuilders (for business conditions, not share prices), popped up to 37 in August. That's the highest the level has been in five years.

>>5 Stocks to Buy to Be Like Buffett

Why shouldn't sentiment be good, though? While it's clear that a rising tide lifts all ships in the housing market (we've already seen the effects of the falling tide, remember), new homes and pre-existing homes are two very different animals. New homes are just bouncing back at breakneck pace right now. In fact, capacity is basically the biggest constraint that homebuilders are facing in most markets. After paring down their balance sheets after the crash, they don't have the project sites or the skilled labor to build homes fast enough.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim 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
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David 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
Dividend Stock Advisor
Try it NOW

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
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs