Homebuilders Rally Despite Disappointing Data (MHO, RYL, BZH, LEN, NVR, DHI, BHS, KBH)

Tickerspy’s Homebuilder Index

HOMEBUILDER INVESTING IDEAS

• Popular long ideas: HOV, PHM, LEN
• Popular short ideas: DHI, PHM, KBH
• Top dividend plays: XIN, KBH, LEN
• Pro favorites: LEN, DHI, TOL

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HOMEBUILDER COVERAGE

These firms typically focus on the residential markets, building, homes, condos, and apartment buildings

• Surging New Home Sales Lift Homebuilders Stocks (CVCO, NVR, BHS, BZH, HOV, KBH)
• Homebuilders Surge on Pending Sales Data (HOV, PHHM, LEN, MTH, RYL, NVR, DHI, TOL)
• Homebuilders Rally Despite Data (BHS, MTH, XIN, PHHM, PHM, RYL)

HOMEBUILDER CHART

HOMEBUILDER METRICS

Avg. Market Cap:	$3.1B
Avg. P/E Ratio:	22.4
Avg. Div Yield:	0.3%

August new home sales came in at an annual pace of 288,000, which matched July’s sales rate and missed the economist consensus for an improvement to a rate of 295,000. TD Securities economist Eric Green told Bloomberg, “There is no upside momentum in housing, period,” but a look at the Homebuilder Stocks Index shows that a number of components have picked up speed over the last month of trading, and stocks are ahead despite the weaker-than-expected report from the Commerce Department this morning.

Today’s biggest winners include M/I Homes (MHO), Ryland Group (RYL), Beazer Homes USA (BZH), and Lennar (LEN), all of which are ahead by 3% or more in the rally. Citigroup analyst Josh Levin said Beazer and Ryland could be takeover candidates as large-caps look to take advantage of attractive valuations, according to a Barron’s report earlier this month.

At the end of the second quarter, Reston,Virginia-based NVR (NVR) was the Pros’ favorite homebuilder, with ten 13F-filing asset managers counting shares among their top-15 U.S.-listed equity holdings. Elsewhere, DR Horton (DHI), Beazer, and Lennar were all in the top holdings of six Pros respectively heading into Q3.

Earlier this month, the housing segment was noted among economic weaknesses in the Federal Reserve Beige Book, as districts reported a “sustained lull” in activity following the expiration of homebuyer tax credits in June. Still, shares of Brookfield Homes (BHS) and KB Home (KBH) have posted more than 20% one-month rallies, and the vast majority of homebuilder stocks are in positive territory for the period.

It will be interesting to see if homebuilders can hold onto their recent gains, despite a lackluster outlook for the housing recovery. Investors can track the Homebuilder Stocks Index for performance trends and a suite of other metrics at tickerspy.com.

Tags: BHS, BZH, DHI, KBH, LEN, MHO, NVR, RYL