In this article, we will discuss the 13 Best Housing Stocks To Buy Now. If you want to skip our analysis of the housing market, you can skip this article and head on to the 5 Best Housing Stocks To Buy Now.
The U.S housing market has been dynamic in 2022. The talk of a correction in the housing market has meant that investors have started to move away from housing stocks. However, many solid real estate stocks are now available at an attractive valuation after a strong correction.
Real Estate always makes for a reliable and resilient investment outlet owing to several factors. Real estate stocks often provide solid dividend income. The fundamental demand and supply dynamics surrounding the housing market are favorable for long-term investment. As per CBS News, the U.S currently has a housing shortage of 3.8 million units, double the amount from 2021.
We have hand-picked the 13 best housing stocks based on a number of factors, including their valuation metrics, analyst ratings, and dividend yield. We have then ranked the stocks from 13 to 1 based on the number of hedge funds in our database that had stakes in them as of the end of the June quarter.
Headquartered in Jericho, N.Y., Kimco Realty Corporation (NYSE:KIM) is a real estate investment trust (REIT) that owns & runs a portfolio of over 400 shopping complexes and mixed-use assets across prime locations in the U.S. Its asset base consists mainly of inner suburban properties in key metropolitan areas. The company is also recognized as an industry leader in environmental, social, and governance (ESG) compliance.
On October 14, 2022, Kimco Realty Corporation (NYSE:KIM) announced that it sold its partial stake in the supermarket chain, Albertsons. The company will get $300 million from the proceeds of the sale. It is expected that the company will pay a special dividend to shareholders from the proceeds. Kimco Realty Corporation (NYSE:KIM) valuation metrics reflect that the company may be undervalued and not incorporating the growth prospects of the company. Kimco Realty Corporation (NYSE:KIM) is also offering an attractive dividend yield of 4.47% to its investors.
On October 7, 2022, Derek Johnston, an analyst at Deutsche Bank, reduced his price target on Kimco Realty Corporation (NYSE:KIM) to $21. The analyst currently has a Hold rating on the company, and in a research note, he stated that the retail leasing demand has slowed down in Q3 as mortgage costs continue to increase after recent hikes in interest rates.
Millennium Management held the highest stake in Kimco Realty Corporation (NYSE:KIM) at the end of the June quarter, with an investment value of approximately $25 million in the company. 19 hedge funds are currently bullish on Kimco Realty Corporation (NYSE:KIM) as per Insider Monkey database.
Number of Hedge Fund Holders: 20
Tri Pointe Homes, Inc. (NYSE:TPH)'s key operations include homebuilding and financial services. The company, with headquarters in California, has an operational base comprising of 41,675 controlled or owned lots as well as 112 selling communities. It is involved in the business of designing, constructing, and selling attached and detached single-family units in the U.S. Its property portfolio consists of six brands.
The company's stock has lost a significant amount of value in 2022, with shares down 43.26% YTD as of October 24, 2022. Tri Pointe Homes, Inc. (NYSE:TPH) is currently trading at a relatively cheap valuation of 5.70x forward P/E, which is significantly lower than the sector median of 12.8x forward P/E. The company's low valuation and robust financial position make the company a good buy right now for exposure in housing.
Earlier this year, investment management firm Third Avenue Management discussed the growth potential of Tri Pointe Homes, Inc. (NYSE:TPH) in its fourth-quarter 2021 investor letter. The fund stated:
Single-Family (4.0% of assets): Tri-Pointe Holdings own highly attractive land assets in supply constrained geographies. The company have taken advantage of the single-family housing boom by monetizing assets at attractive prices despite a challenged cost environment. Tri-Pointe's exceptional asset quality coupled with insatiable demand for residential housing should allow them to grow intrinsic value despite higher costs and supply chain delays industrywide.
As per Insider Monkey database, 20 hedge funds had stakes in Tri Pointe Homes, Inc. (NYSE:TPH) at the end of the June quarter. AQR Capital Management was the most bullish fund on the company's stock, with a total holding of 2,536,331 company stocks at the end of Q2 2022.
Number of Hedge Fund Holders: 21
Cavco Industries, Inc. (NASDAQ:CVCO) is committed to home building and provision of home service. Their factory-built housing segment includes manufactured homes, modular homes, park model, and cabin R.V.s, whereas their financial service segment offers mortgage lending and insurance. The company employs over 6,300 individuals and has 48 distribution points across U.S and Canada. Some of the key brands of Cavco include Cavco Homes, Palm Harbor Homes, Fairmont Homes, Destiny Homes, Fleetwood homes, and Chariot Eagle.
Cavco Industries, Inc. (NASDAQ:CVCO) recently established a new 184,000-square-foot manufacturing facility in North Carolina. The facility will ensure the building of high-quality homes to meet the demand for new homes.
As of August 08, 2022, Greg Palm, an analyst at Craig-Hallum, has a Buy rating on Cavco Industries, Inc. (NASDAQ:CVCO) stock with a price target of $335. The company is currently trading at a valuation of EV/EBITDA (FWD) of 5.49x as of October 24, 2022, considerably lower than the sector median of 8.31x. Given the company's strong history of operational excellence, the company is a good buy at this price level for investors with a long holding period.
At the end of Q2 2022, 21 hedge funds in Insider Monkey database were bullish on the company. Broad Bay Capital remained the fund with the biggest holding at the end of the quarter, amounting to a value of over $52 million.
Number of Hedge Fund Holders: 22
Eagle Materials Inc. (NYSE:EXP) is a key U.S producer and supplier of light building materials and heavy construction materials. It is involved in the manufacturing and distribution of Portland cement, concrete, gypsum wallboard, recycled paperboard, and oil & gas proppants.
Eagle Materials Inc. (NYSE:EXP) has demonstrated an economic moat with its long history of profitability and operational effectiveness as compared with its peers. On September 22, Adrian Huerta, an analyst at JPMorgan, increased his price target on Eagle Materials Inc. (NYSE:EXP) shares to $140. The analyst raised his 2023 EBITDA estimate for the company by 3% to reflect an increase in pricing. The company is currently trading at a forward P/E of 9.62x as compared to the sector median of 11.30x as of October 24, 2022. Moreover, Eagle Materials Inc. (NYSE:EXP) currently offers a dividend yield of 0.88%.
Here is what L1 Capital International Fund had to say about Eagle Materials Inc. (NYSE:EXP) in its Q4 2021 investor letter:
Adjustments to the portfolio were relatively modest and centered on some of the smaller positions. Within the Top 10 holdings, there were two additions and two exits, although both companies that exited the Top 10 remain meaningful positions. Eagle Materials returned to the Top 10 due to relative outperformance, with the share price increasing 27% (in USD). Eagle Materials is one of the portfolio's businesses exposed to the U.S. new residential, repair and renovation and infrastructure sectors, all of which have a robust outlook.
At the end of the quarter ending June 2022, Citadel Investment Group was the leading holder of the company's stock, with an investment value of approximately $20 million in the company's shares. As per Insider Monkey database, 22 hedge funds owned stakes in Eagle Materials Inc. (NYSE:EXP) at the end of Q2 2022.
Number of Hedge Fund Holders: 24
In business since 1962, Federal Realty Investment Trust (NYSE:FRT) is engaged in the business of dealing in premium retail properties mainly located in the key coastal regions across the U.S. They hold expertise in developing urban, mixed-use localities. The company owns around 106 properties which comprise of approximately 3,200 residential units and house approximately 3,100 tenants.
Federal Realty Investment Trust (NYSE:FRT) has been working on enhancing its ESG compliance and, on 13 October 2022, announced to reduce its greenhouse gas emissions by 46% by the end of 2030. The company currently has a solar plant with a capacity of 14 M.W., which it plans to increase in the future.
Federal Realty Investment Trust (NYSE:FRT) is considered a dividend aristocrat by investors as it has paid an increasing dividend to investors for the last 55 years. The current dividend payment of the company is $4.32 for the year. The company's stock price is down 32.5% YTD as of October 24, 2022. Federal Realty Investment Trust (NYSE:FRT) offers an attractive dividend yield of 4.68% at the current price level.
8. Meritage Homes Corporation (NYSE:MTH)
Number of Hedge Fund Holders: 25
Meritage Homes Corporation (NYSE:MTH), based in Arizona, is in the business of homebuilding and financial services. The homebuilding business unit engages in land acquisition, land development, home construction, marketing new and old homes, and more. The financial services unit offers mortgage services.
On October 10, 2022, Jay McCanless, an analyst at Wedbush, reduced his price target on Meritage Homes Corporation (NYSE:MTH) to $102. The analyst has an Outperform rating on the stock and believes that the current downturn in the housing market is temporary and the market is going to change directions during the first half of next year.
Meritage Homes Corporation (NYSE:MTH) appears undervalued at every valuation metric and is currently trading at a forward P/E of 3.62x as of October 24, 2022. The company is fundamentally strong, and although a high-interest rate environment has caused a slowdown in housing demand, the long-term demand outlook is still strong due to a supply shortage which will spur housing demand.
Here is what Sterling Partners Equity Advisors has to say about Meritage Homes Corporation (NYSE:MTH) in its Q4 2021 investor letter:
Meritage Homes is a large public homebuilder in the United States focused on the entry-level and first move-up buyers in Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee.
Number of Hedge Fund Holders: 29
Toll Brothers, Inc. (NYSE:TOL) was founded by Robert Toll and Bruce Toll in 1967. It is the leading constructer of luxury housing and is currently providing services across 24 states in the U.S. The company serves a wide range of customer bases, including but not limited to first-time movers, empty-nesters, second-home buyers, active adults, and more.
As per its fiscal year Q3 results, the company's backlog amounts to $11.2 billion, which will be sufficient for the company to keep generating strong cash-flow due to the headwinds present in the housing market. Toll Brothers, Inc. (NYSE:TOL) is trading at a forward P/E of 4.49x as of October 24, 2022, which presents a bargain price for investors. Toll Brothers, Inc. (NYSE:TOL) also offers a dividend yield of 1.92% at the current price level.
Here is what Baron Real Estate Fund has to say about Toll Brothers, Inc. (NYSE:TOL) in its Q2 2022 investor letter:
Toll Brothers, Inc. is the leading luxury homebuilder in the U.S. Toll Brothers' shares corrected more than 41% in the first six months of 2022. Its valuation is only 0.9 times tangible book value versus a long-term average of approximately 1.4 times book value and a peak multiple of approximately 2.0 times book value.
Greenhaven Associates held the highest stake in the company at the end of Q2 2022, with a total holding of 5,357,903 shares in the company. According to Insider Monkey database, 29 hedge funds owned stakes in Toll Brothers, Inc. (NYSE:TOL) at the end quarter ending June 2022.
Number of Hedge Fund Holders: 32
Headquartered in Reston, Virginia, NVR, Inc. (NYSE:NVR) is another player in the residential construction industry. Employing about 6,600 individuals, the company conducts its operation within two units, homebuilding and mortgage banking. The company's construction segment operates in 15 states across the country, covering 35 urban areas.
Earlier in August, NVR, Inc. (NYSE:NVR) announced a share buyback program in which the company intends to purchase its outstanding common stock of $500 million. The company has been continuously doing share repurchases since 1994 as it is a tool through which the company provides value to its shareholders. Since its IPO, the company has decreased its share count by 75% while raising EPS by four times in addition to the organic profits' growth.
NVR’s business fundamentals remain sound, and the company has a strong balance sheet. The company has $1.4 billion in cash available on its balance sheet, which positions the company to survive a downturn in the market, unlike many of its homebuilding peers.
Here is what Diamond Hill Large Cap Fund has to say about NVR, Inc. (NYSE:NVR) in its Q1 2022 investor letter:
Homebuilder NVR, along with other housing companies, was pressured in Q1 primarily on concerns that rising mortgage rates will dampen new home demand. We recognize the challenges presented by a rising interest rate environment in the near term. Longer term, the secular outlook on housing construction is positive, as there remains a material shortage of housing stock in the U.S. We also like NVR's approach in which it has an option on land rather than owning it outright, which exposes the company to less risk from falling land prices.
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Disclosure: None. 13 Best Housing Stocks To Buy Now is originally published on Insider Monkey.
