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data suggests that a recovery in the housing sector is underway. Prices
of homes may have only a little more to fall, interest rates are at
record lows and falling unemployment all point to a resurgence in
A sustained recovery housing hould help more names the
just the home builders. The concerns over high inventory and the shadow
inventory may actually serve to limit the gains home builders may make
in the coming months. So investors may need to look elsewhere…
How else can investors participate in the expected recovery? Here
are a few other plays for investors looking to capitalize on the
recovery in the housing sector.
Pier 1 (PIR - Snapshot Report)
is specialty retailer of imported decorative home furnishings and is a
Zacks #1 Rank (Strong Buy). As new homes are purchased, retailers like
Pier 1 imports stand to benefit from new furnishings such as lamps,
tables, décor or other accessories.
Analysts have highly accurate in
predicting the earnings from PIR with the company meeting the Zacks
Consensus Estimate in each of the last four quarters. What has driven
the stock price of late has been the higher earnings estimates.
In the same way, Bed Bath & Beyond (BBBY - Analyst Report) a Zacks #2 Rank (Buy) can be expected to participate in the recovery.
BBBY stock has gained 30% over the last year and a string of positive earnings surprises over the past year.
Another way to play the expected recovery are the companies that will
benefit from people trying to prepare their homes for a sale in the
coming year. Along with regular maintenance, last minute repairs ( to
homes for sale are likely to help companies like Beacon Roofing Supply (BECN - Analyst Report). Beacon
Roofing supply is a Zanks #1 Rank (Strong Buy) stock and has seen two
straight positive earnings surprises. BECN is reporting earnings this
week and has not seen a change to this quarters Zacks Consensus
Estimate in the last 90 days. This bodes well for a positive earnings
surprise. It’s also not the center of publicity like a Lowes or Home
Depot, which can give early investors an edge on the herd.
Finally there is the information angle that can be played. As
people look for the homes they want to buy, they will likely try to
find a mortgage or at least a gage what their mortgage rate should be.
For this information, consumers could go to Zacks #2 Rank (Buy) Bankrate (RATE - Snapshot Report). Bankrate
provides interest rate information to consumers that are looking for
mortgages, CD's and credit cards. Mortgage providers will advertise on
this site in hopes of converting an interest rate shopper into a
customer. Bankrate has only two earnings reports since its recent
IPO, but has notched one positive earnings surprise. With a 29x forward
PE multiple, its clear the market is expecting more beats in the
future. Future surprises are likely to drive the stock price higher.
On the more speculative side of the information play on the housing recovery is Zillow (Z). As a Zack #3 Rank (Hold) this is a more cautious pick, and it too hasn't been public that long. Zillow
operates an online real estate information marketplace. The Zillow
database holds information on 100 million homes and offers a
"Zestimate" or estimated price for residential properties. The company
earns revenue via advertising and subscriptions by realtors who wish to
be associated with specific zip codes. Of late, Zillow has moved
significantly higher, gaining more than 38% since the beginning of the
year. The company reports earning after the close on Febrauary 15, 2012
and guided investors on its last conference call to expect more
investment and revenue to be below last quarters levels.
As consumers search for their homes on Zillow, they may then
turn to Bankrate to see if they have a good interest rate. Sellers will
likely be fixing up their roofs before any sales are made this spring.
Finally, new home purchases are likely to be followed up by new
furnishings from Bed Bay & Beyond and Pier 1.