Stephanie Link: This Could Be the Season for Toll Brothers

NEW YORK (TheStreet) -- Since my investment bias is a GARP style, I always look for groups and stocks that have lagged the broader averages. One group that has lagged for a while has been the home builder stocks - and that's piqued my interest. The headwinds are sort of obvious - that when rates rise, demand slows and earnings are at risk for this sector. I am of the mindset that rates will continue to increase and the yield curve will steepen as the U.S. economy continues to improve - although so far this year the surprise has been just the opposite where the 10-year bond yield remains stubbornly below the recent 3% peak level seen at the end of 2013.

I think the risk is to the upside in GDP and that we could see a 4% growth handle some time next year - as the data points continue to show upside acceleration in PMIs, ISMs, new orders, factory orders, durable goods, auto sales, retail sales and better job growth. We're also beginning to see stronger corporate CAPEX spending which is slated to grow 7% this year - something we've not seen in the last several years. So why would I even look at the home builders when I think rates will continue to go higher? Simply put, I don't think rates are going to run away from us - but rather I see it more a gradual move higher and at the same time, if jobs get better, if the participation rate for the unemployed improves, and home prices continue to rise - consumer confidence should also improve. And demand will not decelerate - especially those companies that have exposure to the higher end consumer - and are somewhat protected from higher rates. So if you have patience and can weather the daily volatility from interest rates, I think the home builders are attractively priced here. My favorite is Toll Brothers (TOL).

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