The housing market just keeps on getting better, and yet homebuilders and many related building and construction plays have been lagging the broader market big time.
Take the iShares U.S. Home Construction ETF (ITB). Top holdings are a who’s who of the nation’s biggest homebuilders: PulteGroup (PHM), Lennar (LEN), DR Horton (DHI), Toll Brothers (TOL) and NVR (NVR).
The housing market’s on fire, you say? Well, tell that to ITB. It’s up just 1.3% for the year. Meanwhile, any plain-vanilla S&P 500 index fund has gained nearly 19%.
As we noted previously, that underperformance is largely attributable to these stocks having come very far, very fast.
Homebuilders went gangbusters all through last year and well into spring. The market — forward looking as it is — began betting on the recovery more than a year ago. As a result, the homebuilders — and much of the wider sector — are now priced for absolute perfection. It’s a case where nothing on the earnings and data fronts can go wrong.
However, where the homebuilders have lagged, some tangential housing plays in building and construction have fared better — in some cases, absolutely crushing-the-market better.
Here are three under-the-radar housing plays putting up amazing year-to-date returns: