Investors Turn Bullish on Housing Stocks

Tuesday, 09 Oct 2012 08:01 AM

By Dan Weil

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Recent signs of a continuing, if mild, recovery in the housing market have made many investors bullish on housing stocks.

The Standard & Poor’s/Case-Shiller index of home prices rose 1.2 percent in July from a year earlier, the biggest 12-month increase since August 2010. Record low mortgage rates and improved consumer confidence are leading people to buy homes.

“We’re finally seeing a more sustained and broad-based improvement in home prices,” Millan Mulraine, a strategist for TD Securities, tells Bloomberg. “The housing sector has made an important turn here, and that is being sustained.”

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Donald Hodges, a manager of the Hodges Pure Contrarian fund, purchased shares of homebuilder PulteGroup (PHM) at less than half their current price. But he’s not looking to sell.

“I think it’s still early in the game,” he tells The New York Times.

He likes the biggest housing companies best. “The small guy just doesn’t have the staying power,” Hodges says. “I think the business will end up more and more in the hands of the bigger companies.”

Others see better values further up the housing stream, in furniture and home improvement companies for example.

“I do think the homebuilding group is one of the first to move, so some of the easy money has been made,” David Weaver, co-manager of Adams Express mutual fund, tells The Times.

“Going forward, the homebuilders probably aren’t the best opportunity. There are probably better opportunities in related industries such as building products.”

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