"Builders are buoyed by President Trump's actions on regulatory reform, particularly his recent executive order to rescind or revise the Waters of the U.S. rule that impacts permitting," said National Association of Home Builders Association Chairman Granger MacDonald.
According to industry data, 25% of the cost of a new home is due to environmental rules. With Trump's February executive order that nixes the clean water rule, plus the promise of continued similar policy reform by the 45th president, U.S. homebuilders are celebrating.
The National Association of Home Builders in association with Wells Fargo (WFC - Get Report) maintains a Housing Market index that measures sentiment in the homebuilder industry. A "50" on the index is considered positive sentiment. The index hit 71 in March, the association reports. In March 2016, the index was at only 58.
TheStreet's Richard Suttmeier suggests Thursday that investors reduce holdings on strength to his risky levels. If you believe there will be that additional strength, there are three stocks perfectly poised for gains:
D.R. Horton's stock had a bad year in 2016. After hitting a high around $34 per share in July, shares plunged more than 20% by the middle of December. But so far, 2017 has been a different story. Year to date, the stock is up by more than 20%.
And there's still room to grow. Analysts are expecting the stock to go as high as $40 per share in the next 12 months, which would represent a gain of nearly 22% from Wednesday's price.
Watch for dips in share price as an opportunity to get in.
PulteGroup (PHM - Get Report) is another homebuilder and seller that specializes in single-family homes. Like other stocks in the industry, shares of PulteGroup took a hit in the second half of 2016 but are now recovering ... and then some.
Year to date, this stock has clocked more than 26.5% gains. But there's no reason why this trend shouldn't continue. Analysts believe this stock could blow past its 2013 highs, to $27 per share. That would mean gains of more than 17% from Wednesday's share price, around $23 -- all the more reason to keep an eye on this homebuilder stock.
KB Home (KBH - Get Report) ended fiscal 2016 on a high note, recording a 21% growth in revenue for the year. And so far in 2017, its shares are climbing. As of Wednesday, this stock is trading up by more than 18% year to date. Investors are taking notice -- some of the biggest funds are upping their stakes in this homebuilder. This week, it was reported that Guggenheim Capital increased its KB Home stake by nearly 40% during the fourth quarter.
Today KB Home's stock trades around $18.50 per share. But analysts are expecting to see gains as high as $22 in the next 12 months. That would make gains of roughly 19% -- not shabby at all.
Although the Trump presidency has thrown several markets into chaos -- notably, pharma -- the homebuilder industry looks like a relatively safe place for your portfolio dollars in 2017. Watch out for a good opportunity to get in it.
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