Homebuilders Have Lagged the Market — Four to Buy Now

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While the S&P 500 is unlikely to end up the year with a stunning 30% gain as it did in 2013, as the first half of this year winds down, the venerable index is up 6.1%. The homebuilders, which had a very slow winter and spring due to the bad weather around the country, are up only 1.4% in comparison. With mortgage rates starting to fall back, the summer selling season starting to kick in and a buyer’s market still holding court in some areas of the country, the sector could be poised for a much stronger second half and a solid 2015.

A new research report from UBS expects the Home Sales Index to increase of 2.5% sequentially, compared to consensus for the index to be up 1.3%. The analysts believe this will indicate a stabilization in sales after declining earlier in the year. Also, positive reports last week from Lennar and KB Homes kicked off the earnings season with good sales and earnings.

With the sector still somewhat out of favor, UBS recommends investors buy these four top names rated Buy.

Beazer Homes USA Inc. (NYSE: BZH) builds quality single-family homes in 16 states and is one of the 10 largest homebuilders in the country. By focusing on the high growth states the company has consistently been able to match Wall Street estimates. The company’s homes are designed to appeal to homeowners at various price points across various demographic segments and are generally offered for sale in advance of their construction. The UBS price target for the stock is $28. The Thomson/First Call consensus target is at $23.71. Beazer shares closed Friday at $20.88.