LEN: Lennar Is One of the Few Sturdy Housing Stocks Now

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It seems that barely a day goes by without the media discussing home-building stocks and the bright future ahead for these companies. The home-building sector has been on the verge of a breakout for over a year now, and it just never seems to happen. Each data point moves the prices of these stocks around, but if you look at the bigger picture, most of them are down on the year so far.

Lennar Corp. (NYSE: LEN)As always, the best way to cut through all the noise, opinions and discussions is to focus on the numbers and look at the stocks with our stock grading tool.

When I enter all the home-builders into Portfolio Grader, I come up with a grade of “C.” Despite the forecasts from the bulls and the bears, the truth is that there is nothing dramatic going on here. Most of the building stocks are just treading water.

Home-building stocks are not falling apart, but most of them are not generating the type of sales and earnings growth that are the hallmark of a winning stock on the verge of moving higher. None of them earn a fundamental grade of “A” as a result of powerful growth, margin expansion, earnings surprises and analyst upgrades. For the most part, these companies are turning what can be described as mediocre performance right now.

Lennar Corporation (LEN)

The best in class builder right now is Lennar Corporation (LEN). Lennar Corporation reported a solid quarter back in September with earnings of 78 cents per share compared to just 54 cents per share in the same period a year ago.

New orders for homes were up 23% and the backlog of homes rose by 23%. So, it looks like Lennar Corporation’s strong performance will continue into 2015. Lennar had its fourth consecutive positive earning surprise, and I expect to see another one when it reports later this month.

Portfolio Grader has taken note of the continued strong fundamental performance of Lennar and raised LEN stock to a “B” last week. Lennar stock is a “buy” at the current price.

The majority of the building stocks are rated “Cs” and are “holds” right now. If you own home-building stocks, there is no need to rush to sell them, but if you do not, they are best ignored for now. When the fundamentals of the sector really do start to improve, it will be reflected in upgrades from Portfolio Grader. Until that happens ignore the noise, and avoid most of these stocks.

Housing Stocks to Sell

There are a few builder stocks that are ranked “sell” and should be sold if you happen to own them right now. WCI Communities Inc (WCIC), TRI Pointe Homes Inc (TPH), M.D.C. Holdings, Inc. (MDC), Taylor Morrison Home Corp (TMHC), Standard Pacific Corp. (SPF) and Meritage Homes Corp (MTH) all earn “Ds” from Portfolio Grader and should be sold the current price.

The housing and home-building markets will eventually experience a strong recovery, and we will see many of the builders show the type of growth that signifies a “buy-rated” stock.  When the recovery happens, Portfolio Grader will see the improvements and upgrade the stocks.  Ignore the noise and speculating about the industry, and trust Portfolio Grader to find the best building stocks at the very best time to buy them.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


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