8. KB Home ( KBH) builds affordable houses for first-time and move-up buyers.

KB delivered 8,500 homes in 2009 at an average selling price of $207,000. It is focused in the Western, Southwestern and Southeastern U.S. Morningstar applauds its customizable and innovative product lineup. The U.S. housing market is still suffering from a glut of inventory, weakening the outlook for homebuilders, whose starts are in a trough.

KB's fiscal third-quarter orders fell 39%. Morningstar is critical of KB's plans to ramp up building amid slack demand. Still, it sees upside in KB's stock, estimating fair value at $21, consistent with a 69% return. With $1 billion of cash and $1.8 billion of debt, KB has one of the strongest balance sheets in its industry group.

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