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

A Red-Hot Fund Plays the Housing Revival

"If an investor is purely seeking income, we are not the right fund," says Kolitch. "Our principal objective is capital appreciation."

Kolitch argues that the outlook for real estate stocks remains bright. He is particularly keen on residential markets. Housing construction fell from 2.2 million units in 2006 to 478,000 in 2009. Recently the annual pace has rebounded to 760,000. Kolitch says that construction will continue climbing because 1.2 million households are formed annually.

"We are in the early stages of what will be a multiyear recovery of the residential housing market," he says. "Cycles typically last six or seven years."

Homebuilders were among the first stocks to jump when construction activity began reviving. In the past year, stocks of leading builders such as Lennar (LEN) and Toll Brothers (TOL) more than doubled.

Kolitch owned some of the homebuilders, but recently sold them because he figured that they had become too rich. Instead he owns companies that provide equipment and supplies for homebuilding.

A holding is Owens Corning (OC), a maker of insulation and roofing supplies. The stock has jumped about 30% in the past year, but Kolitch says that the shares will continue running as the housing recovery unfolds.

Why have suppliers like Owens Corning lagged behind homebuilders? Kolitch says that homebuilders are a pure play on new construction, so they rally hardest when the cycle turns. Suppliers like Owens Corning get some of their sales from remodeling, which doesn't depend on new home construction.

Another supplier he likes is Stanley Black & Decker (SWK), the maker of power tools. He figures that the shares trade for 10 time next year's earnings, a modest price for a dominant supplier.

Kolitch has about 20% of the fund in companies that operate senior living projects, such as assisted living facilities and nursing homes. Holdings include Capital Senior Living (CSU) and Brookdale Senior Living (BKD). The senior companies will get a big boost from revived home sales, Kolitch says.

In order to afford assisted living, he points out, many residents must first sell their homes. That has been hard to do in recent years. But now that residential markets are reviving, there will be stronger demand for senior facilities.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

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
AAPL $94.04 -1.00%
FB $100.70 0.95%
GOOG $688.17 0.80%
TSLA $149.26 0.86%
YHOO $26.80 -0.92%


Chart of I:DJI
DOW 15,944.53 -82.52 -0.51%
S&P 500 1,847.47 -5.97 -0.32%
NASDAQ 4,278.1160 -5.6370 -0.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs