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Should You Buy the Cheap Home Builder Stocks?

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  • (0:20) - Growth and Momentum Stocks Pull Back
  • (2:35) - Housing Market’s Contribution To GDP
  • (8:30) - The Slow Down For The Housing Market
  • (12:55) - Tracey’s Top Stock Picks: TOL, PHM, KBH, LEN, DHI, MHO
  • (18:15) - Big Takeaways on Beaten Down Housing Stocks 
  •             Podcast@Zacks.com

Welcome to Episode #115 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.

Stocks have pulled back, hitting some of the growth and momentum names hard. But that doesn’t mean value stocks have been immune from the sell off, far from it.

Banks and the home builders have been hit especially hard, with many of those stocks now in bear market corrections, down 20% or more.

Is it a sign that the economy is about to slow? Or is the selling simply overdone?

How Cheap Are the Home Builders?

1.       Toll Brothers (TOL - Free Report) is trading with a forward P/E of 6.6 and a PEG of just 0.4. Yet the shares are down nearly 40% year-to-date.

2.       Pulte (PHM - Free Report) has a forward P/E of just 6.1 and a PEG ratio of 0.3. It recently reported earnings which saw revenue up 25% while earnings jumped 74%. But the shares are still down 32% year-to-date.

3.       Lennar (LEN - Free Report) has a forward P/E of 8.3 and a PEG of 0.5. Shares have plunged 37% in 2018.

4.       KB Home (KBH - Free Report) is one of the more expensive in the group, with a forward P/E of 11.2. But it still has a value PEG of just 0.6. Shares have sunk 40% year-to-date.

5.       M/I Homes (MHO - Free Report) is one of the smaller home builders with a market cap of $600 million. But it has a forward P/E of 5.8. Shares are down 38% year-to-date. It’s about to report earnings so you may want to tune in.  

What else should you know about the dirt-cheap home builder stocks?

Listen to this week’s podcast to find out.

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