In this article, we discuss the 11 best housing stocks of 2021. If you want to skip our detailed analysis of the housing industry, go directly to the 5 Best Housing Stocks of 2021.
The housing market is on fire. This statement seems ubiquitous nowadays. Indeed, on July 27, S&P CoreLogic reported a 16.6% increase in the U.S. housing prices in May, higher than the 14.8% increase reported for April. According to S&P CoreLogic, this growth is broad-based; that is, the housing markets in the 20 U.S. cities they are tracking have risen and the 18 of which are at the highest they have ever been. Business Insider notes that the inadequate supply of housing is driving up the prices as the demand continues to recover with the reopening. Business Insider also regards the increase in construction costs as well as lack of building space as drivers of the supply shortage.
As the supply bottlenecks coupled with high demand drive up the prices, home construction companies such as D.R. Horton, Inc. (NYSE: DHI) and Lennar Corporation (NYSE: LEN) benefitted from this market. Both companies have returned around 45% to investors over the course of the past year. Also, the two largest home improvement retailers The Home Depot, Inc. (NYSE: HD) and Lowe’s Companies, Inc. (NYSE: LOW) have benefitted from this high demand as people are not only shopping for newer homes but also for better quality of life at home as the work from home has changed the way people envision their homes.
Regarding the future, some analysts warn about a bursting of a bubble in the housing market while others see that the prices will stabilize as the supply catches up with the demand. Of course, a possible upward tick in inflation expectations can result in higher mortgage rates that will eliminate the current ultra-low borrowing opportunities for the demand side. In this sense, Business Insider notes that this housing boom is different from the phenomenon back in the mid-2000s in that today’s market is characterized by supply shortages while the primary driver in the mid-2000s was the risky lending practices with subprime mortgages. On the other hand, S&P CoreLogic gives a more reserved and ambivalent analysis. It argues that either the current housing boom is temporary as people just accelerate their home purchases or that there is a new permanent demand regarding certain locations.
This permanent demand hypothesis seems to be backed by the data on the regional breakdown of population growth. In particular, Freddie Mac reports that, over the last 3 years, the population growth rate in the South and West was seven times the rate in the Northeast and Midwest. Freddie Mac also notes that the population growth in the South is driven by domestic migration while, in the West, the main driver is the higher birth rate. In this regard, housing companies that operate in the South and West are likely to see continued high demand in the mid and long term. Such a company is Mid-America Apartment Communities, Inc. (NYSE:MAA) which operates in the Southeastern and Southwestern markets.
While the housing boom has already caught the eye of hedge funds, the entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the 11 best housing stocks of 2021. We picked the stocks that are expected to gain value on the back of the recent housing boom. You will find several companies in our list that benefit from construction, home improvement and home building activity. These companies were ranked keeping in mind the basic business fundamentals, hedge fund sentiment, and analyst ratings for each.Â
Best Housing Stocks of 2021
11. Floor & Decor Holdings, Inc. (NYSE: FND)
Number of Hedge Fund Holders: 38
Floor & Decor Holdings, Inc. (NYSE:FND) is an American household retailer of flooring. It is ranked eleventh on our list of 11 best housing stocks of 2021. The stock has returned over 74.32% to investors over the course of the past year.
On May 6, Floor & Decor Holdings, Inc. (NYSE:FND) posted earnings for the first quarter of 2021, reporting earnings per share of $0.68, beating estimates by $0.14. The revenue over the period was around $783 million, up 41.01% year-over-year.
At the end of the first quarter of 2021, 38 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Floor & Decor Holdings, Inc. (NYSE:FND), up from 31 the preceding quarter worth $1.03 billion.
On June 3, Jefferies reiterated its Buy rating on Floor & Decor Holdings, Inc. (NYSE:FND) while upgrading its price target to $136 from $133.Â
Floor & Decor Holdings, Inc. (NYSE:FND) is one of the best housing stocks of 2021, along with Lowe’s Companies, Inc. (NYSE: LOW), Hovnanian Enterprises, Inc. Class A (NYSE: HOV), LGI Homes Inc (NASDAQ: LGIH), D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN), and The Home Depot, Inc. (NYSE:HD).
10. Mid-America Apartment Communities, Inc. (NYSE: MAA)
Number of Hedge Fund Holders: 25
Mid-America Apartment Communities, Inc. (NYSE:MAA) is a REIT operating in markets across Southeastern and Southwestern United States. It is ranked tenth on our list of 11 best housing stocks of 2021. The stock has returned over 64.31% to investors over the course of the past year.
On July 28, Mid-America Apartment Communities, Inc. (NYSE:MAA) posted earnings for the second quarter of 2021, reporting earnings per share of $1.84, beating estimates by $0.20. The revenue over the period was around $437 million, up 5.79% year-over-year.
At the end of the first quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $252 million in Mid-America Apartment Communities, Inc. (NYSE:MAA). Out of the hedge funds being tracked by Insider Monkey, King Street Capital has the most valuable stake in Mid-America Apartment Communities, Inc. (NYSE:MAA) as of the end of the first quarter of 2021, worth close to $65 million, comprising 4.85% of its total 13F portfolio.
On July 19, Raymond James reiterated its Outperform rating on Mid-America Apartment Communities, Inc. (NYSE:MAA) while raising its price target to $205 from $175, arguing that the recovery in Atlanta, Charlotte, and Rayleigh will contribute to Mid-America Apartment Communities, Inc. (NYSE:MAA).Â
9. Masco Corporation (NYSE: MAS)
Number of Hedge Fund Holders: 33
Masco Corporation (NYSE:MAS) is a building products manufacturer with 38 manufacturing facilities globally, 28 of which are located in the United States. It is ranked ninth on our list of the 11 best housing stocks of 2021. The stock has returned over 4.70% to investors over the course of the past year.
On July 29, Masco Corporation (NYSE:MAS) posted earnings for the second quarter of 2021, reporting earnings per share of $1.14, beating estimates by $0.11. The revenue over the period was around $2.18 billion, up 23.53% year-over-year.
At the end of the first quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $686 million in Masco Corporation (NYSE:MAS). Out of the hedge funds being tracked by Insider Monkey, Ariel Investments has the most valuable stake in Masco Corporation (NYSE:MAS) as of the end of the first quarter of 2021, worth close to $102 million, comprising 1% of its total 13F portfolio.
On July 15, Wells Fargo gave an Overweight rating to Masco Corporation (NYSE:MAS) with a $68 price target, expecting robust numbers for 2022.
Just like Lowe’s Companies, Inc. (NYSE: LOW), Hovnanian Enterprises, Inc. Class A (NYSE: HOV), LGI Homes Inc (NASDAQ: LGIH), D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN), and The Home Depot, Inc. (NYSE:HD), Mohawk Industries, Inc. (NYSE:MHK) is one of the best housing stocks of 2021.
8. Owens Corning (NYSE: OC)
Number of Hedge Fund Holders: 30
Owens Corning (NYSE:OC) is the world’s largest fiberglass manufacturer based in Ohio, also active in roofing and insulation. It is ranked eighth on our list of the 11 best housing stocks of 2021. The stock has returned over 56.92% to investors over the course of the past year.
On July 28, Owens Corning (NYSE:OC) posted earnings for the second quarter of 2021, reporting earnings per share of $2.60, beating estimates by $0.46. The revenue over the period was around $2.24 billion, up 37.78% year-over-year.
At the end of the first quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $285 million in Owens Corning (NYSE:OC). Out of the hedge funds being tracked by Insider Monkey, GLG Partners has the most valuable stake in Owens Corning (NYSE:OC) as of the end of the first quarter of 2021, worth close to $52 million, comprising 0.22% of its total 13F portfolio.
On July 29, Loop Capital reiterated its Buy rating on Owens Corning (NYSE:OC) upgrading its price target to $120 from $112, expecting a strong volume of insulation and roofing to support the company’s Q3 results.
Owens Corning (NYSE:OC) is one of the best housing stocks of 2021, along with Lowe’s Companies, Inc. (NYSE: LOW), Hovnanian Enterprises, Inc. Class A (NYSE: HOV), LGI Homes Inc (NASDAQ: LGIH), D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN), and The Home Depot, Inc. (NYSE:HD).
7. Mohawk Industries, Inc. (NYSE: MHK)
Number of Hedge Fund Holders: 36
Mohawk Industries, Inc. (NYSE:MHK) is a Georgia-based household durables company manufacturing flooring products. It is ranked seventh on our list of the 11 best housing stocks of 2021. The stock has returned over 134% to investors over the course of the past year.
On July 29, Mohawk Industries, Inc. (NYSE:MHK) posted earnings for the second quarter of 2021, reporting earnings per share of $4.45, beating estimates by $0.76. The revenue over the period was around $2.95 billion, up 44.10% year-over-year.
At the end of the first quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $1.30 billion in Mohawk Industries, Inc. (NYSE:MHK). Out of the hedge funds being tracked by Insider Monkey, Pzena Investment Management has the most valuable stake in Mohawk Industries, Inc. (NYSE:MHK) as of the end of the first quarter of 2021, worth close to $324 million, comprising 1.31% of its total 13F portfolio.
On August 2, Raymond James reiterated its Strong Buy rating on Mohawk Industries, Inc. (NYSE:MHK), boosting its price target to $250 from $240 following strong Q2 results.
Masco Corporation (NYSE:MAS) is one of the best housing stocks of 2021, along with Lowe’s Companies, Inc. (NYSE: LOW), Hovnanian Enterprises, Inc. Class A (NYSE: HOV), LGI Homes Inc (NASDAQ: LGIH), D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN), and The Home Depot, Inc. (NYSE:HD).
6. Tempur Sealy International, Inc. (NYSE: TPX)
Number of Hedge Fund Holders: 37
Tempur Sealy International, Inc. (NYSE:TPX) is a Kentucky-based household durables company manufacturing bedding products. It is ranked sixth on our list of the 11 best housing stocks of 2021. The stock has returned over 113.63% to investors over the course of the past year.
On July 29, Tempur Sealy International, Inc. (NYSE:TPX) posted earnings for the second quarter of 2021, reporting earnings per share of $0.79, beating estimates by $0.22. The revenue over the period was around $1.17 billion, up 75.75% year-over-year.
At the end of the first quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $1.13 billion in Tempur Sealy International, Inc. (NYSE:TPX). Out of the hedge funds being tracked by Insider Monkey, H Partners Management has the most valuable stake in Tempur Sealy International, Inc. (NYSE:TPX) as of the end of the first quarter of 2021, worth close to $402 million, comprising 36.51% of its total 13F portfolio.
On July 30, Wedbush reiterated its Overweight rating on Tempur Sealy International, Inc. (NYSE:TPX) while raising its price target to $53 from $45, noting the possibility of double-digit sales growth in 2022.
Tempur Sealy International, Inc. (NYSE:TPX) is one investors’ and analysts’ radar amid the housing market boom, along with other housing and construction stocks like Hovnanian Enterprises, Inc. Class A (NYSE: HOV), LGI Homes Inc (NASDAQ: LGIH), D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN) and The Home Depot, Inc. (NYSE:HD).
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Disclose. None. 11 Best Housing Stocks of 2021 is originally published on Insider Monkey.
