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7 Housing Sector Stocks That May Be Ready to Explode in 2020

7 Housing Sector Stocks That May Be Ready to ExplodePosted on Monday, June 22nd, 2020 by MarketBeat Staff

In one of the strongest economies our nation has ever known, housing stocks should have been going through the roof. But it took the Federal Reserve practically giving money away for homebuyers to get their appetite back.

And then even with mortgage rates at historical lows, the novel coronavirus came on the scene and ruined the party again. Home buying and home building came to a halt. Some of which was simply due to the fact that Americans were staying inside.

One of the closely watched indicators of the health of the housing market is the National Association of Home Builders (NAHB) Housing Market Index (HMI). In March, prior to the national mitigation efforts, the HMI had climbed to 72. For reference purposes, a neutral reading is 50.

Although not unexpected, April showed just how far demand had fallen. The HMI plunged 42 points to 30. Things got slightly better in May as the index climbed to 37.

But that may be changing. In June, the HMI posted a better than expected 56.8%. After hitting 37 in May, this marked the Index’s largest monthly gain ever. And not surprisingly some lagging housing stocks got a much-needed jump start. Homebuilder stocks in particular have been on the rise in recent months.

To help you capitalize on what looks like an emerging trend for the rest of the year, we’ve put together this special presentation.

#1 - D.R. Horton (NYSE:DHI)

D. R. Horton logo

D.R. Horton (NYSE:DHI) is one of many homebuilders that has picked itself up from the mat. In March the stock tumbled more than 50%. Let’s be honest, it’s hard to get excited about buying a new construction when there’s no construction activity taking place. But that’s all changed. DHI stock has made up that deficit and then some. In fact, as of this writing, the stock is up approximately 8% for the year.

As a result, recent analyst recommendations are bullish on the 12-month outlook for DHI stock. On June 15, Citigroup raised its price target for the stock from $56 to $69, which would be just over a 13% gain from the stock’s current level.

And if that kind of growth doesn’t excite you, keep in mind that D.R. Horton is a solid dividend stock. The company has increased its dividend in each of the last eight years.

D.R. Horton reports second-quarter earnings in early August. Those numbers will likely be dreadful as they will reflect nearly a month with no construction activity in large parts of the country. But analysts will be looking to see what the company’s outlook is for the future.

About D. R. Horton
D.R. Horton, Inc operates as a homebuilding company in East, Midwest, Southeast, South Central, Southwest, and West regions in the United States. It engages in the acquisition and development of land; and construction and sale of homes in 27 states and 81 markets in the United States under the names of D.R. Read More 

Current Price: $54.07
Consensus Rating: Buy
Ratings Breakdown: 12 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $55.12 (1.9% Upside)



#2 - Pulte Group (NYSE:PHM)

PulteGroup logo

PulteGroup, Inc.

The next stock to look at is Pulte Group (NYSE:PHM). Although PHM stock has climbed nearly 100% since the selloff in March, it hasn’t quite turned back to a gain for the year. One factor that goes into evaluating these home builders is size. Pulte Group is the third-largest home construction company in the United States (per number of homes closed). It operates in 44 markets in 23 states.

Analysts have a consensus rating of Hold on the stock. However, on June 15, Citigroup raised its target for PHM stock from $32 to $43. The stock moved up over 5% on that recommendation alone. If the stock were to hit that target, it would post a gain of just over 20% from the stock’s level at the time of this writing.

Pulte Group has paid out a dividend in each of the last two years. The company has a payout ratio of 13.75% which should give investors confidence that the dividend is safe, and perhaps will be boosted again.

About PulteGroup
PulteGroup, Inc, through its subsidiaries, primarily engages in the homebuilding business in the United States. The company acquires and develops land primarily for residential purposes; and constructs housing on such land. It offers various home designs, including single-family detached, townhouses, condominiums, and duplexes under the Centex, Pulte Homes, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods brand names. Read More 

Current Price: $32.88
Consensus Rating: Hold
Ratings Breakdown: 6 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $40.47 (23.1% Upside)



#3 - TopBuild (NYSE:BLD)

TopBuild logo

Another way to play the housing sector other than the homebuilder stocks is with their suppliers. TopBuild (NYSE:BLD) is one of the leading companies in the installation and distribution of insulation and related building products to the U.S. construction industry.

The stock is up over 15% for the year despite plunging nearly 50% in just two weeks in March. In the last month alone, the stock is up close to 20%, undoubtedly due to increased demand brought about by contractors and home builders going back on site.

Because the company is a supplier for the construction industry, they should be a bellwether for the broader sector. On June 18, BLD stock got a lift from the analyst firm Benchmark that raised its price target for the stock from $113 to $139. That would be a gain of approximately 15% from the stock’s current level. BLD stock has a better rating than 85% of its peers making it one of the more compelling housing stocks to consider.

About TopBuild
TopBuild Corp. engages in the installation, distribution, and sale of insulation and other building products to the United States construction industry. The company operates in two segments, Installation and Distribution. It offers rain gutters, garage doors, fireplaces, fireproofing and firestopping products, shower enclosures, closet shelves, accessories, and other building products; and residential insulation services. Read More 

Current Price: $111.74
Consensus Rating: Buy
Ratings Breakdown: 6 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $117.80 (5.4% Upside)



#4 - Floor & Décor Holdings (NYSE:FND)

Floor & Decor logo

Similar to TopBuild, Floor & Décor Holdings (NYSE:FND) is another supplier for the construction industry. It specializes in hard surface flooring and related products. FND stock is up over 10% in 2020. And looking at the stock through a wider lens, it’s up over 35% in the last 12 months.

It goes without saying that hard surface flooring is one of the key selling points for many homebuyers. And that’s not likely to go away any time soon. That should be a catalyst for the stock, not only for new construction, but for remodels as well.

Floor & Décor Holdings has shown impressive growth despite just becoming an entity 20 years ago. The company has a market cap of $5.7 billion dollars. Part of that growth was being nimble enough to move into areas where competitors had been beaten up during the financial crisis and using the low-interest rates to grow the business.

On June 17, UBS raised its price target for the company from $48 to $65. That would be a nearly 15% gain from its current level.

About Floor & Decor
Floor & Decor Holdings, Inc operates as a multi-channel specialty retailer of hard surface flooring and related accessories. The company's stores offer tile, wood, laminate, vinyl, and natural stone flooring products, as well as decorative and installation accessories. It serves professional installers, commercial businesses, and do it yourself customers. Read More 

Current Price: $57.81
Consensus Rating: Buy
Ratings Breakdown: 11 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $51.79 (-10.4% Upside)



#5 - Restoration Hardware (NYSE:RH)

Restoration Hardware logo

Remodeling can be just as significant as new construction. And Restoration Hardware (NYSE:RH) is positioned to serve both markets. The company specializes in high-end home furnishings. But the company does it with approximately 70 high-end galleries, a catalog business, and about 20 outlet stores.

Many homeowners are discovering that they may want to renovate their existing space. Whatever their motivation, RH can help these prospective buyers relieve themselves of that disposable income.

At a time when many home furnishing suppliers try to be all things to all people, RH unapologetically appeals to the luxury space. I can respect that, and apparently so do many investors.

RH stock is up over 30% for the year and a whopping 175% in the last three months. And that is showing the strength of the company’s business model. Keep in mind, the company’s stores were closed during the pandemic. But the company provides personal delivery to ensure that they have control over the delivery experience. And when its stores are open, they provide in-store restaurants that consumers seem to love.

About Restoration Hardware
RH, together with its subsidiaries, operates as a retailer in the home furnishings. It offers products in various categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware, and child and teen furnishings. The company provides its products through its retail galleries; and Source Books, a series of catalogs, as well as online through rh.com, restorationhardware.com, rhbabyandchild.com, rhteen.com, and rhmodern.com, as well as waterworks.com. Read More 

Current Price: $255.33
Consensus Rating: Buy
Ratings Breakdown: 10 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $225.06 (-11.9% Upside)



#6 - Cavco Industries (NASDAQ:CVCO)

Cavco Industries logo

Manufactured and modular homes have made major advancements. The quality of these homes is making them very appealing for first-time homebuyers as well as for empty nesters who may not need a lot of house, but want privacy. And in many areas of the country, manufactured home communities are a very affordable housing option. Cavco Industries (NASDAQ:CVCO) is one of the leaders in this space.

CVCO stock got off to a great start in 2020, but like most stocks was savaged in the downturn and has not made a full recovery. But the trend is moving upwards. In the last month, the stock is up 10%.

One of the appealing things about Cavco is that it has separate insurance and mortgage divisions in addition to selling its homes. That gives the company multiple revenue streams that home buyers of this type will typically avail themselves of since the qualifications are different in this sector.

About Cavco Industries
Cavco Industries, Inc designs, produces, and retails manufactured homes primarily in the United States. It operates in two segments, Factory-Built Housing and Financial Services. The company markets its manufactured homes under the Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes, Friendship Homes, Chariot Eagle, and Lexington Home brands. Read More 

Current Price: $187.21
Consensus Rating: Hold
Ratings Breakdown: 0 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $204.00 (9.0% Upside)



#7 - Home Depot (NYSE:HD)

Home Depot logo

If you want to look at the housing market a completely different way, you can simply look to gobble up shares of Home Depot (NYSE:HD). People staying at home were getting projects done. And that’s reflected in a stock that went up over 60% since bottoming out in March.

But that’s not really surprising. The company was on an upward trend. The novel coronavirus was just a speed bump. Once investors realized that having consumers at home with little reason to avoid the to-do list, they would start doing home projects, Home Depot stock made sense.

Home Depot has a bit of a moat that protects it from Amazon (NASDAQ:AMZN). That’s because, for the most part, Amazon leaves Home Depot alone in the home improvement category. But that’s not the only reason Home Depot is thriving. The company made a major push into the digital space last year. And they’ve embraced the omnichannel model of allowing customers to get the products they want, when they want them, where they want them delivered.

Home Depot is going to face competition from Lowe’s (NYSE:LOW), but for now the stock has a first mover advantage. And that should hold for the rest of this year at least.

About Home Depot
The Home Depot, Inc operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself and professional customers. Read More 

Current Price: $248.50
Consensus Rating: Buy
Ratings Breakdown: 24 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $254.62 (2.5% Upside)

 

If there’s been one thing that’s been clear about the stock market in 2020, it’s that investors want it to go higher. But I think the rally is based less on certainty about the fundamentals, but more that investors are willing the market to go higher.

This is interesting because investors generally hate uncertainty. And there are few sectors that don’t have uncertainty. In the housing sector, the big question is will construction be able to continue unabated? If so, then the outlook for housing stocks is very good.

But if there are regional shutdowns to stem a recurrence of the virus, that could be disastrous. That’s the risk that’s on the table. I think this market may be attractive for quite some time. And here’s why. Many Americans have been stuck at home. And for those homeowners who are continuing to work, they may be realizing they don’t like the current design of their home. All of a sudden, the open concept seems so 2019. Walls are starting to go back up, or at least that’s the desire.

The question will be whether owners choose to renovate an existing space or take a path of least resistance and search out a home that they can configure the way they want, from the ground up.

This will be one of the more interesting stories not just for the rest of 2020, but for years to come. Remember, some companies are going to be allowing workers to continue to work from home. So a home office may become a very real need.

5 Travel Company Stocks Likely to Suffer From the Coronavirus

How important is the global travel and tourism industry? It’s a sector that accounts for about 10% of the world’s adult workforce. That’s 350 million people. The industry also accounts for at least 4% of the global gross domestic product (GDP).

In short, it’s an industry that accounts for trillions of dollars for the economy. And it relies on the most visible workers like pilots and cruise ship captains to the kitchen and housecleaning staff and servers. The travel industry is in many ways a service industry. But when there’s nobody to service, these businesses take a tumble.

And tumble it has. The world is going through a period of enforced social distancing. Many countries are taking even more extreme measures to lock down parts, or all, of their countries in an effort to contain the spread of the coronavirus and to flatten the curve to prevent healthcare workers and hospitals from being overwhelmed.

But that means fewer people are flying. Planned vacations are being canceled. And all of this is bad news for a sector that relies on the mobility of global travelers.

To be fair, the best of these companies should recover just fine. However, some of these companies had fundamental concerns that will be magnified by the loss of revenue.

View the "5 Travel Company Stocks Likely to Suffer From the Coronavirus" Here.






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