In this article, we discuss 5 best housing stocks to buy in 2022. If you want our detailed analysis of these stocks, go directly to 11 Best Housing Stocks To Buy In 2022.
5. PulteGroup, Inc. (NYSE:PHM)
Number of Hedge Fund Holders: 35
PulteGroup, Inc. (NYSE:PHM) is a leading American home construction company. In the third quarter of 2021, 35 hedge funds were bullish on PulteGroup, Inc. (NYSE:PHM), with stakes totalling $771.75 million, as compared to 34 funds in the quarter earlier, with stakes in PulteGroup, Inc. (NYSE:PHM) worth $948.5 million.
On February 1, PulteGroup, Inc. (NYSE:PHM) reported its Q4 results, posting an EPS of $2.61, beating estimates by $0.28. Revenue for the quarter jumped 36.53% year-on-year to $4.36 billion, surpassing consensus estimates by approximately $163 million.
UBS analyst John Lovallo upgraded PulteGroup, Inc. (NYSE:PHM) on February 3 to Buy from Neutral with a price target of $70, up from $63. The stock’s current valuation more than reflects the potential for moderating industry growth and peak earnings in 2022, the analyst told investors in a research note. He believes PulteGroup, Inc. (NYSE:PHM)’s risk/reward is “decidedly favorable at these levels”.
Among the hedge funds tracked by Insider Monkey, AQR Capital Management held the biggest PulteGroup, Inc. (NYSE:PHM) stake in Q3 2021, with more than 3 million shares worth $143.3 million.
4. Invitation Homes Inc. (NYSE:INVH)
Number of Hedge Fund Holders: 36
Invitation Homes Inc. (NYSE:INVH) is a Texas-based company owning single-family rental properties in the United States. In Q3 2021, Jeffrey Furber’s AEW Capital Management held a significant stake in Invitation Homes Inc. (NYSE:INVH), with 3.6 million shares worth $140.6 million. Overall, 36 hedge funds were bullish on the stock in the third quarter of 2021.
Invitation Homes (NYSE:INVH) on February 4 declared a $0.22 per share quarterly dividend, which is a 29.4% increase from its prior dividend of $0.17. The dividend is payable on February 28, to shareholders of record on February 18.
On February 1, KeyBanc analyst Austin Wurschmidt initiated coverage of Invitation Homes (NYSE:INVH) with an Overweight rating and a $46 price target. With a loss-to-lease in the high teens and 97.5%-98% target occupancy, the analyst expects the company to continue delivering above-average internal growth. External growth remains a strategic priority and an attractive source of growth for Invitation Homes (NYSE:INVH).
Here is what Baron Real Estate Fund has to say about Invitation Homes Inc. (NYSE:INVH) in its Q1 2021 investor letter:
“The Fund also has investments in REITs that would benefit from this movement out of urban areas into suburban areas. We expect single-family rental REIT Invitation Homes, Inc. to benefit as more people opt for single-family home rentals rather than apartment rentals.”
3. Mohawk Industries, Inc. (NYSE:MHK)
Number of Hedge Fund Holders: 38
Based in Calhoun, Georgia, Mohawk Industries, Inc. (NYSE:MHK) produces flooring products for residential and commercial customers in North America and Europe. Pzena Investment Management held a $282 million position in Mohawk Industries, Inc. (NYSE:MHK) as of Q3 2021, and is the leading stakeholder of the company from the 38 hedge funds that were bullish on the stock.
Mohawk Industries, Inc. (NYSE:MHK) announced its Q4 results on February 10, posting earnings per share of $2.95, beating estimates by $0.09. The $2.76 billion revenue outperformed estimates by $39.40 million.
On February 3, Truist analyst Keith Hughes lowered the price target on Mohawk Industries, Inc. (NYSE:MHK) to $200 from $236 but kept a Buy rating on the shares. The analyst is citing observations by industry participants at a recent trade show, suggesting that U.S. orders to end 2021 and early in 2022 were “weak”. He stated that Mohawk Industries, Inc. (NYSE:MHK) trades at an “exceptionally low multiple” of 6-times enterprise value to expected FY22, thus recommending the shares.
2. Builders FirstSource, Inc. (NYSE:BLDR)
Number of Hedge Fund Holders: 53
Builders FirstSource, Inc. (NYSE:BLDR) is a Texas-based manufacturer of building supplies and value-added construction, repair, and remodeling services. On January 19, Builders FirstSource, Inc. (NYSE:BLDR) priced its previously announced offering of $300 million aggregate principal amount of its 4.250% senior notes due 2032. Net proceeds from the offering will be used to repay a portion of the outstanding debt under the firm’s senior secured ABL facility and related transaction fees.
On January 6, DA Davidson analyst Kurt Yinger raised the price target on Builders FirstSource, Inc. (NYSE:BLDR) to $100 from $93 and kept a Buy rating on the shares. The analyst cited the company’s completed acquisition of National Lumber, which adds to its “already leading national scale”.
Coliseum Capital, as of Q3 2021, held the leading stake in Builders FirstSource, Inc. (NYSE:BLDR), with 8.90 million shares worth $460.6 million. Overall, 53 hedge funds were bullish on the stock in the third quarter of 2021, down from 60 funds in the quarter earlier.
Here is what Merion Road Capital Management has to say about Builders FirstSource, Inc. (NYSE:BLDR) in its Q3 2021 investor letter:
“I added to our position in Builders FirstSource (“BLDR”) during the quarter. BLDR is the largest national supplier of structural building products and value-added components to the residential construction market. They have been active in consolidating the industry, most notably with the merger of BMC earlier this year. Like other distributors, BLDR benefits from scale advantages that afford them a robust product offering, enhanced purchasing power, and fixed cost leverage. They will continue to acquire smaller competitors and have announced 5 new deals so far this year.
I view the strategic benefit of these acquisitions in three different buckets. There are the core tuck-in acquisitions of facilities and customer lists that increase scale and geographic reach. An example would be the company’s May acquisition of John’s Lumber, a lumber and specialty product distributor serving the Detroit MSA, at 0.5x revenue. There are product acquisitions that leverage their platform to increase distribution and improve the product offering. For instance, last month BLDR announced the acquisition of California TrusFrame, a designer and manufacturer of prefabricated components like trusses and wall panels, at 1.3x revenue. And lastly BLDR has begun investing in software and services. In June they spent $450mm on the purchase of WTS Paradigm, a software company that addresses the complexity around building configuration, estimating, and manufacturing, at 9.0x revenue. By utilizing software in the planning process, WTS Paradigm cuts down on material and labor waste, ensures an optimal fit of product and design, and eases the contractor’s workload. BLDR has followed this up with a much smaller software acquisition in September.
BLDR is in the very early innings of their software investment, so it is difficult to pinpoint exactly how it will impact the company in the coming years. Management believes that there is a lot of low hanging fruit, pointing to a McKinsey study ranking the construction industry as second to last on overall digitization. If anyone has had any work done to their house, I am sure they can anecdotally attest to this. BLDR plans to leverage WTS Paradigm to increase internal productivity (i.e. improved estimating leading to fewer visits to the job site), cross-sell the software to existing clients, and drive greater adoption of value-added products. So thinking a few years out I think the goal would be to have higher margins on their commodity business, a greater mix of revenue coming from value added products, a stronger relationship with their customer, and an enhanced competitive advantage…” (Click here to see the full text)
1. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 58
The Home Depot, Inc. (NYSE:HD) is a prominent American home improvement company providing tools, construction products, appliances, and installation services. The Home Depot, Inc. (NYSE:HD) has a rich dividend history, and on November 18, the company declared a $1.65 per share quarterly dividend, which was distributed on December 16, to shareholders of record on December 2.
In the third quarter of 2021, The Home Depot, Inc. (NYSE:HD) was a significant housing stock among the smart investors. Of the 58 hedge funds that were bullish on The Home Depot, Inc. (NYSE:HD), Fisher Asset Management held a leading stake in the company, with 7.4 million shares worth $2.45 billion.
On February 12, JPMorgan analyst Christopher Horvers lowered the price target on The Home Depot, Inc. (NYSE:HD) to $406 from $413 and kept an Overweight rating on the shares. According to the analyst, the consumer environment remains supportive but slower than in 2020 and 2021, and the recent rate move “raises risk of further give-back” in The Home Depot, Inc. (NYSE:HD) shares.
Here is what Ensemble Capital Management has to say about The Home Depot, Inc. (NYSE:HD) in its Q4 2021 investor letter:
“On the more positive side, we saw notable performance contribution from Home Depot. In the midst of a housing shortage and rising home prices, Americans turned to home improvement projects with Home Depot’s startlingly fast growth in 2020 continuing throughout 2021. With each quarter that passed showing a continuation of strong growth rather than the slowdown that many investors expected, the stock led the S&P 500 for most of the year and turned in a heady 27% rally in the fourth quarter to close out the year. Notably, while Do It Yourself homeowners did indeed shop at Home Depot less than they did during record setting 2020, almost half of the company’s revenue comes from Pro contractors where strong growth continues.”
You can also take a look at 10 Dividend Aristocrats with Over 3% Yield and 10 High Yield REIT Dividend Stocks For 2022.
