Homebuilders are rising as fast as the homes they build. Are you too late for the rally? No, says one analyst.
If you’re cranky about missing the run-up in homebuilders, don’t worry, says one analyst. There’s a housing stock with a chart pointing 20% higher according to Richard Ross, Global Technical Strategist at Auerbach Grayson and a Talking Numbers contributor. That company is Lennar, the Miami-based company with homebuilding and mortgage servicing subsidiaries.
Homebuilders have been on a tear as of late. The S&P Homebuilders SPDR ETF (XHB) is up more than 17% this year. Excitement was further fueled with two major players beating earnings estimates this week. Toll Brothers released earnings of $0.14 per share, double of what Wall Street analysts expected. Meanwhile, the Home Depot’s first quarter earnings were over 22% above the previous year’s. That said, the Home Depot’s rival, Lowe’s, lived up to its name by reporting lower revenues and lower-than-expected profit.
This morning also saw April existing-home sales rise by 0.6% from March, according the National Association of Realtors. But those are homes that are already in place. It’s the US Census Bureau’s new permits statistics that has help make investors jump on the floorboards for homebuilders. In the first four months of this year, permits for new housing units rose 27% or nearly 64,000 units to 297,000.
Which brings us to Lennar. The company is up 12% in 2013 but it’s trading seven times what it was in during the slump of 2009. And the charts say there’s more upside to go, according to Ross. On the other hand, Steve Cortes, cofounder of Veracruz TJM, believes the stock’s price is built on shaky fundamentals.
Who’s right? Watch the video above to hear their analysis and decide for yourself.