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Top 3 Picks to Play a Hot Home Construction Market
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The 11-company strong Building Products-Retail industry is hot.
I see a #50 Zacks Industry rank out of 255 groups (Top 20%) in late January 2020. Over the past 8 weeks, this ranking was no lower than #92. This score has been as high as #25 (Top 10%).
Why is that?
Covering analysts caught a data surprise. According to a report from the U.S. Commerce Department, construction of new U.S. homes reached its highest level in 13 years in December 2019.
Warm weather was a key assist. Sometimes, “hot” really does mean hot. But that latest monthly spike also captures more enduring strength in the U.S. housing market. Attribute this deeper strength to low mortgage rates, cash made available from new records in stock markets, a solid U.S. jobs market and resilient consumer confidence.
Let’s confirm a long-term home construction boom with private sector data. Use the latest National Association of Home Builders (NAHB) annual forecasts for housing starts.
Do one quick scan. Private sector starts data (below) maps out a similar bullish story.
Underlying business fundamentals for home construction were indeed improving from 2017 to 2019. In fact, this U.S. home construction boom should have legs across 2020, going all the way to the end of 2021.
Internal studies have shown Zacks’ best stock pickers. Roughly half of a stock's price movement can be attributed to a stock's industry group.
In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
By focusing on top stocks within the top 50% of Zacks Ranked Industries, you can dramatically improve your stock picking success.
Finally, is it true? Did a fundamentally strong Building-Products Retail industry deliver outperforming share returns?
YES.
Consult the table of share returns below. This industry outperformed the broad S&P 500 index at EVERY time interval, from 1 month all the way out to 5 years.
Next, I provide relevant investing details on the top three stocks in the group.
I ordered them by market capitalization, from the largest company to the smallest.
(1) Lowe’s Companies (LOW - Free Report) : This is a Zacks #2 Rank (BUY) stock with a share price of $121. In early 2019, this was a $90 stock. At these prices, I see the market cap is $92.9B. The forward P/E is 21.26. The stock market beta is above average at 1.28.
There is a Zacks Value score of B and a Zacks Growth score of A.
The average of the last 4 earnings surprises is +0.9%.
Lowe’s Companies is one of the leading home improvement retailers, which has its operations primarily in the U.S. and Canada. The company offers services to homeowners, renters and commercial business customers.
Homeowners and renters principally include do-it-yourself (DIY) customers and do-it-for-me (DIFM) customers who utilize the company’s installed sales programs.
Commercial business customers consist of those who work in the construction, repair/remodel, commercial and residential property management, and business maintenance professions.
This large company is based in Mooresville, NC and was incorporated in 1952.
(2) Builders FirstSource (BLDR - Free Report) : This is a Zacks #1 Rank (STRONG BUY) stock with a share price of $27. In early 2019, this was just a $12 stock. At these elevated prices, I see the market cap is $3.1B. However, the forward P/E still looks good at 12.14. The stock market beta is high at 1.90.
There is a Zacks Value score of B and a Zacks Growth score of A. The average of the last 4 earnings surprises is a whopping +28.2%.
Builders FirstSource is a leading supplier and manufacturer of structural and related building products for residential new construction in the United States.
Manufacturing facilities include plants that manufacture roof and floor trusses, wall panels, stairs, aluminum and vinyl windows, custom millwork and pre-hung doors.
Builders FirstSource also distributes windows, interior and exterior doors, dimensional lumber and lumber sheet goods, millwork and other building products.
The midsized company is headquartered in Dallas, Texas and was founded in 1998.
(3) BMC Stock Holdings : This is a Zacks #2 Rank (BUY) stock with a share price of $31. In early 2019, this was just a $16 stock. At these elevated prices, I see the market cap is $2.1B. However, the Forward P/E still looks good at 15.28. In this case, the stock market beta is low at 0.90.
There is a Zacks Value score of A and a Zacks Growth score of A.
The average of the last 4 earnings surprises is a whopping +29.3%.
BMC Stock Holdings provides diversified building products and services to professional builders and contractors, primarily in the residential housing market.
The company's portfolio of products and services spans building materials includes millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management and an eBusiness platform.
BMC Stock Holdings, formerly known as Stock Building Supply Holdings, is headquartered in Raleigh, North Carolina. It is the smallest of the three companies.
That’s all I have for this hot industry, whose top stocks are still not overvalued.
I wish upon all of you a happy investing experience.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Top 3 Picks to Play a Hot Home Construction Market
The 11-company strong Building Products-Retail industry is hot.
I see a #50 Zacks Industry rank out of 255 groups (Top 20%) in late January 2020. Over the past 8 weeks, this ranking was no lower than #92. This score has been as high as #25 (Top 10%).
Why is that?
Covering analysts caught a data surprise. According to a report from the U.S. Commerce Department, construction of new U.S. homes reached its highest level in 13 years in December 2019.
Warm weather was a key assist. Sometimes, “hot” really does mean hot. But that latest monthly spike also captures more enduring strength in the U.S. housing market. Attribute this deeper strength to low mortgage rates, cash made available from new records in stock markets, a solid U.S. jobs market and resilient consumer confidence.
Let’s confirm a long-term home construction boom with private sector data. Use the latest National Association of Home Builders (NAHB) annual forecasts for housing starts.
Do one quick scan. Private sector starts data (below) maps out a similar bullish story.
Underlying business fundamentals for home construction were indeed improving from 2017 to 2019. In fact, this U.S. home construction boom should have legs across 2020, going all the way to the end of 2021.
By focusing on top stocks within the top 50% of Zacks Ranked Industries, you can dramatically improve your stock picking success.
Finally, is it true? Did a fundamentally strong Building-Products Retail industry deliver outperforming share returns?
YES.
Consult the table of share returns below. This industry outperformed the broad S&P 500 index at EVERY time interval, from 1 month all the way out to 5 years.
Next, I provide relevant investing details on the top three stocks in the group.
I ordered them by market capitalization, from the largest company to the smallest.
(1) Lowe’s Companies (LOW - Free Report) : This is a Zacks #2 Rank (BUY) stock with a share price of $121. In early 2019, this was a $90 stock. At these prices, I see the market cap is $92.9B. The forward P/E is 21.26. The stock market beta is above average at 1.28.
Lowe’s Companies is one of the leading home improvement retailers, which has its operations primarily in the U.S. and Canada. The company offers services to homeowners, renters and commercial business customers.
Homeowners and renters principally include do-it-yourself (DIY) customers and do-it-for-me (DIFM) customers who utilize the company’s installed sales programs.
Commercial business customers consist of those who work in the construction, repair/remodel, commercial and residential property management, and business maintenance professions.
This large company is based in Mooresville, NC and was incorporated in 1952.
(2) Builders FirstSource (BLDR - Free Report) : This is a Zacks #1 Rank (STRONG BUY) stock with a share price of $27. In early 2019, this was just a $12 stock. At these elevated prices, I see the market cap is $3.1B. However, the forward P/E still looks good at 12.14. The stock market beta is high at 1.90.
There is a Zacks Value score of B and a Zacks Growth score of A.
The average of the last 4 earnings surprises is a whopping +28.2%.
Builders FirstSource is a leading supplier and manufacturer of structural and related building products for residential new construction in the United States.
Manufacturing facilities include plants that manufacture roof and floor trusses, wall panels, stairs, aluminum and vinyl windows, custom millwork and pre-hung doors.
Builders FirstSource also distributes windows, interior and exterior doors, dimensional lumber and lumber sheet goods, millwork and other building products.
The midsized company is headquartered in Dallas, Texas and was founded in 1998.
(3) BMC Stock Holdings : This is a Zacks #2 Rank (BUY) stock with a share price of $31. In early 2019, this was just a $16 stock. At these elevated prices, I see the market cap is $2.1B. However, the Forward P/E still looks good at 15.28. In this case, the stock market beta is low at 0.90.
BMC Stock Holdings provides diversified building products and services to professional builders and contractors, primarily in the residential housing market.
The company's portfolio of products and services spans building materials includes millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management and an eBusiness platform.
BMC Stock Holdings, formerly known as Stock Building Supply Holdings, is headquartered in Raleigh, North Carolina. It is the smallest of the three companies.
That’s all I have for this hot industry, whose top stocks are still not overvalued.
I wish upon all of you a happy investing experience.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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