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Get Ready – These Forgotten Stocks are Screaming to New Highs

Thursday, February 23, 2017 9:14
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This post Get Ready – These Forgotten Stocks are Screaming to New Highs appeared first on Daily Reckoning.

Owning homebuilder stocks was dead money walking just a few months ago.

Homebuilders endured not one but two major drawdowns in 2016. The group tanked to new 52-week lows during the winter correction. They also slipped double-digits heading into election season as the reality of another rate hike drew near…

These whipsaw moves frustrated plenty of investors. As a result, the financial press hasn’t said much about homebuilders or the housing market lately. The hot money moved on to bigger and better trades.

That’s about to change.

Homebuilder stocks have quietly become some of the strongest stocks on the market this month. If you jump on a trade today, you have a great chance at owning one of the best performers of 2017 – no matter how much your local economist hates the housing market right now.

Speaking of haters, you’ve probably noticed that everyone’s stuck on the same old housing narrative the financial media have pounded into our heads for the better part of a decade. No one owns homes anymore… No one will ever buy a house again… Renting is back in vogue… Rising rates will kill any momentum in the housing market this year…

I could go on and on. But the charts are telling a much different story than the negative headlines. Homebuilder stocks are in rally mode once again. And it’s time to pay close attention.

We’re also seeing some intriguing earnings data backing up this stealth homebuilder breakout. Look no further than home improvement giant Home Depot (NYSE:HD).

Home Depot is a great barometer for the health of the housing market. Last year, the stock didn’t impress investors. In fact, it came close to a complete breakdown just before the election. Yet as the post-election rally swept Home Depot shares back toward their highs, it became clear that more was at play than a rising tide.

That’s when the company announced a massive fourth-quarter earnings beat. Home Depot didn’t just smash analyst expectations – it also raised its dividend and announced a $15 billion repurchase program.

The home improvement giant’s growth isn’t all smoke and mirrors, either. While many retailers are frantically building new stores to grow revenue, Home Depot has posted impressive numbers without expanding its footprint. Its organic growth is coming from increasing foot traffic and contractor sales instead.

You guessed it – that’s a bullish signal for the housing sector.

Backing Up

While shares of Home Depot blast to new highs this week, it should come as no shock that existing home sales just hit a 10-year high, also thrashing expectations.

As you’ve probably guessed, we’re getting pretty bulled up on homebuilder stocks once again. But we’re no strangers to the homebuilder trade. Back in 2015, a deluge of data made it clear that the housing market had finally stabilized. Yes, there are outliers—like outrageously high prices in San Francisco. But for most of the nation, the housing market has reverted to something resembling normalcy.

We’re a full decade removed from the housing bubble. Inventories are tight. Buyers are lined up and ready. After ten years of little to no substantial gains in homebuilder stocks, it’s finally time for these puppies to get moving.

Right now, it’s clear that there’s a major breakout is taking place for the once-underperforming homebuilders. And if we jump onboard now, we could be in for a heck of a ride.


Greg Guenthner
for The Daily Reckoning

The post Get Ready – These Forgotten Stocks are Screaming to New Highs appeared first on Daily Reckoning.

This story originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.


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