Homebuilder stocks are in a hot phase.
The housing ITB ETF hit an all-time high on Wednesday, led by Lennar after his profit jump and the decision to outsource his tech investments and commercial mortgages business. This ETF has risen sharply since its lows last March.
However, residential activities appear to have cooled off. Housing starts were down 10.3% in February, a lower-than-expected drop as colder weather in the US constrained construction. Rising interest rates and higher wood costs could also hinder the industry.
According to Quint Tatro, president of Joule Financial, stocks still look like a buy even as those headwinds trigger a retreat.
“I think you have to buy them,” Tatro told CNBC’s Trading Nation on Wednesday. “The strength amid these negative numbers here is an indication that there are a lot of upside opportunities. I think there is weather, but then there is input cost. … If that leads to a decline in property stocks, I think they ‘ I buy here. “
Tatro said Lennar is an example of a name that could be a buy. He cites 10 times the earnings multiple as one reason to find the stock attractive. It rose 14% on Wednesday after winning.
“We believe that the real estate cycle is still in its early stages and these stocks are on a huge uptrend,” he said.
Delano Saporu, founder of New Street Advisors, agreed that there is more to like in the room than not.
“The story is still positive,” Saporu said in the same interview. “People want the game to be at home, so they want to be in places where they can work from home.”
He said Lennar was attractive but also pointed to D.R. Horton has potential in this group, particularly its exposure to the single family home starter market.
“That is their area of expertise and that is the area in which they are implementing their strategy,” said Saporu. “I think this is a very good area [at]. “
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