Homebuilder Stocks: Winners & Losers

PulteGroup outpaces, likely due to institutional buyers. Lennar shares fall.
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NEW YORK (

TheStreet

) -- Stocks in the homebuilder sector were mixed on Monday as investors absorbed the latest getting-better-but-still-dismal snapshot of the U.S. housing market.

PulteGroup

(PHM) - Get Report

easily outpaced the group, gaining several percentage points on heavy trading volume.

Lennar

(LEN) - Get Report

, meanwhile, fell nearly 3%.

The latest update on the housing market came early Monday after the

National Association of Home Builders reported its index of builder sentiment jumped 3 points in October to a reading of 16 as interest among potential buyers began to pick up.

>>Homebuilder Sentiment Jumps in October

While it was the index's first improvement in five months, returning the reading to levels last seen in June of 2009, results still pointed to a weak housing environment. Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.

At midday, shares of PulteGroup were off earlier highs but still up 1.5% on the day. Well over 11 million shares were in play halfway through the trading session, compared with their average daily volume of 6.4 million shares.

"There's no good, obvious reason for the gains," Stifel Nicolaus analyst Michael R. Widner told

TheStreet

. "The only differential with Pulte is they're quite a bit longer on land than most, but today is a bit of a head scratcher," he added, commenting on the builder's share price.

Widner has a hold rating on PulteGroup. On Thursday, analysts from UBS upgraded PulteGroup shares to neutral, from sell, with an $8.50 price target.

Widner speculated that the heavy volume on PulteGroup shares, volume he described as "pretty crazy" and without any "particularly good explanation for it," is likely stemming from institutional buyers, and probably from multiple firms.

It could be "pure speculation and trading," he said, adding that he doesn't know anyone who is super bullish on PulteGroup shares.

Lennar's share price decline came despite TheStreet Ratings' stock model

upgrading its Class B shares to hold from sell.

KB Home

(KBH) - Get Report

fell 1.2%. Vicki Bryan, senior high yield analyst at Gimme Credit, reiterated her underperform rating on the builder's stock.

She speculated the industry is ripe for consolidation given that it's "chronically over-supplied in a profoundly depressed market and fresh out of Hail Mary saves in the form of fat

tax refunds and federal stimulus programs to carry it potentially another year or two before sustainable profitability is restored."

Bryan tapped

Ryland

(RYL)

,

M/I Homes

(MHO) - Get Report

and

Beazer

(BZH) - Get Report

as logical acquisition targets for KB Home, which, if funded in part with stock, could increase its revenue and earnings, transforming "its weak credit profile to one of the best of the sector."

Elsewhere in the sector, the

SPDR S&P Homebuilders

(XHB) - Get Report

and

iShares Dow Jones US Home Construction

(ITB) - Get Report

, exchange-traded funds that track the sector, fell 0.8% and 0.5%, respectively.

Beazer shares added 1.2% and M/I Homes 1%. Ryland edged 0.3% lower. Industry peer

D.R. Horton

(DHI) - Get Report

fell 1.1%.

-- Written by Miriam Marcus Reimer in New York.

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