There’s no doubt the economy isn’t going gangbusters here. But there are plenty of people — and companies — that have been patient and kept their money safe in the hopes of moving into the real estate market when rates and prices were very attractive. That has put housing stocks in the spotlight more recently.
The proof of this renewed interest? Mortgage applications are rising and home construction is also on the rise.
While you may not be ready to pick up a new home, buy some condos or pick up some commercial property, people are also upgrading their houses since they’re spending a lot more time there.
And remember, there are massive firms that solely focus on “alternative” investments, which means non-stock investing, like real estate. They can borrow at outrageously low rates and buy entire subdivisions from developers if they wish to add certain properties or locations into their portfolios.
The seven housing stocks worth your time right now are beneficiaries of these trends in one way or another:
- RH (NYSE:RH)
- Sleep Number (NASDAQ:SNBR)
- Lowe’s (NYSE:LOW)
- PulteGroup (NYSE:PHM)
- Floor & Décor Holdings (NYSE:FND)
- Home Depot (NYSE:HD)
- Cavco Industries (NASDAQ:CVCO)
And they’re all highly rated growth stocks in my Portfolio Grader I use to find Growth Investor plays. With that in mind, let’s take a closer look at what makes each of these worthy of consderation.
Housing Stocks to Buy: RH (RH)
Formerly known as Restoration Hardware, this firm revamped that catalog and storefront business into its new upscale iteration with high-end galleries, a massive catalog and outlet stores.
Currently it has about 70 galleries in the U.S. and Canada, around 20 design galleries, half a dozen baby & child galleries and 3 dozen outlets. It’s akin to the Williams-Sonoma (NYSE:WSM) of furnishings, with customer service being a major part of its premium experience.
This is a good market to be in right now, since wealthy clients stuck at home have the disposable income to refurnish their main homes, ski homes and beach homes. And those that aspire to that lifestyle can also access this style now that there’s not much else to spend on.
In the past three months RH stock is up 175%, which shows that smart money sees this as a good stock for our current predicament. And it’s still relatively cheap.
Sleep Number (SNBR)
This is another company that is making waves among the housing stocks niche, as people are spending more time at home, and likely more time in bed now that they don’t have their commutes to deal with.
The concept of an air-filled mattress was a wild idea in 1987, when the competition was Civil War-era spring mattresses. It was a disruptor in a very conservative space.
But it has become a major player and it has managed to maintain control of its own fortunes through the journey. It has its own stores and distribution network.
Certainly, memory foam has made a big splash, but SNBR continues to grow its brand and has been able to make its pricing competitive to other alternative mattresses. And no one else makes a bed like SNBR. That’s a nice moat in its industry, which is what I’m looking for with any of my Growth Investor recommendations.
It has a $1.2 billion market cap, but that makes SNBR stock a formidable player among other housing stocks. The stock is up 68% in the past three months and still trades at a trailing price-to-earnings ratio below 15.
Lowe’s (LOW)
The country’s No. 2 home improvement store is another indirect beneficiary of the lockdown. As people are taking on DIY projects and now, feeling comfortable enough to have contractors in to do work, Lowe’s is becoming a very busy place again.
And in this market, the next quarter’s numbers will be huge compared to the lockdown period, which will be enough to drive LOW stock even higher.
Also remember that Lowe’s has been around since 1946 in North Carolina, so it has seen booms and busts before and has kept on growing.
It’s more of pure play on U.S.-based home improvement and hardware, with some stores in Canada as well. It has tried some efforts expanding beyond U.S. shores, but has found its greatest success at home.
LOW stock is up 93% in the past three months — and remember, this stock has a $102 billion market cap — and still trades below the average P/E for the Dow Jones Industrial Average and S&P 500.
PulteGroup (PHM)
Mortgage rates just hit a record low … again. And that is very good news for the No. 3 home builder in the U.S. It operates in 44 markets in 23 states and has a number of brands beyond the original Pulte brand, including Centex, John Weiland, American West, Radnor and others.
All the brands appeal to all stages of life and demographic sectors in the market.
By extending its brands across so many markets, it can take advantage of regional trends.
But the bottom line is, it’s cheap to build right now and homes are in demand, so that means PHM should see solid growth and improving margins. Plus PHM offers mortgage and title services, so the company has vertically integrated the financing into the building, which is another piece of the business the company can profit from.
The stock is up 86% in the past three months and is still trading at a P/E that’s less than 10. And I’ve got lots more great buys for you in all sorts of industries.
Floor & Décor Holdings (FND)
This national flooring company got its start just 20 years ago, yet is now sporting a market cap of nearly $6 billion and doing nearly $2 billion in sales a year.
That’s quite a growth story compared to other housing stocks.
Some of that has been its ability to move into areas where the competition was hurt during the 2008 financial crisis and take advantage of the low interest rates to grow its business.
Since that era of low rates has only improved now, and there are millions of people sitting around staring out their flooring, business is booming once again. Plus, all the new construction means its commercial lines are also growing.
FND stock is up 103% in the past three months, but the stock is getting a bit expensive. However, if the recovery in the U.S. stays strong, its premium will be worth it in the long run.
Home Depot (HD)
This is the largest hardware store in the world. It operates across the U.S., Canada and Mexico as well as Guam, the Virgin Islands and Puerto Rico.
Started in 1978 its disruptive concept was the big box hardware store. Remember, back then local hardware stores dotted the American landscape and they provided certain things, but there were other specialty stores where you had to go to get other items.
For example, for one job you may need to hit the local hardware store, lumber yard, paint store and flooring company to get all you needed for a job. Home Depot changed all that.
Today, you see this concept play out across industries and no one thinks about the big box concept or how it changed the face of American retail.
And Home Depot has continually found a way to make this concept work for its shareholders. In today’s economy, its ability to draw DIYers as well as contractors working on renovation projects continues to grow its revenue and margins.
It also operates Interline Brands, which has over 90 distribution centers and specializes in the commercial maintenance and repair business.
HD stock is up 55% in the past three months, but delivers a reliable 2.4% dividend and is trading with a P/E that’s in line with S&P 500 average. You can see why this is a mainstay of my Growth Investor Buy List and also one of the best housing stocks to consider now.
Cavco Industries (CVCO)
It might not be a name that springs to mind when considering housing stocks to buy, but Cavco is one of the top builders of manufactured homes, modular homes, commercial buildings, park model RVs and vacation cabins. It has retailers in the U.S., Canada, Mexico and Japan.
It sells these homes under eight different brands and also has an insurance division as well as a mortgage division. Those both offer significant revenue streams moving forward since both the financing and the insurance on these homes is different than it is on standard structures.
Also, new technologies have made these homes much higher quality than they were in the past and there’s much broader appeal for first time home buyers that don’t want to take on a huge mortgage, or older couples that don’t need a lot of house but want privacy.
Its vacation cabin division should also do well as people look to the great outdoors for down time and they can buy a piece of land and drop a house on it quickly.
CVCO stock is up 53% in the past three months yet still trades in line with the S&P 500.
Outside of the housing market, a major way to employ smart diversification is when a company is entrenched in the biggest megatrends of our time. One that I’m particularly excited about now is helping enable a major upgrade across the telecom industry, across the world.
The 5G Buildout Is an Incredible Opportunity for Investors Right Now
Within two years, most cell phones will be 5G enabled and be able to wirelessly handle television streaming. With 5G, we’ll have cable modem speeds on any device; no need to plug in. That’s a big deal for rural areas … the very same areas that are also key to President Donald Trump’s reelection. So, by pushing 5G over the goal line, Trump will deliver a big win for his base — and strike a blow against Chinese rivals like Huawei Technologies.
But in the big picture, 5G is about much more than trade wars and faster downloads. Because 5G is 100 times faster than 4G, it’ll allow your wireless internet devices to work in real time. That advancement is a game changer for tech companies.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion. This buildout is where I see opportunity with 5G stocks now.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how my 5G infrastructure play will capture more market share from the broadband cable companies.
The stock I’m targeting is enjoying an influx of big money on Wall Street, and it has good fundamentals, too — making it a “Strong Buy” in my Portfolio Grader system now.
When you do, you’ll see how to claim a free copy of my investment report, The King of 5G “Turbo Button” Technology, which has full details on this company — and what makes it such a great buy now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
