7. D.R. Horton, Inc. (NYSE:DHI)
D.R. Horton, Inc. (NYSE:DHI) was among Jim Cramer’s stock calls as he suggested that many red-hot stocks can keep making investors money. Cramer noted that the company’s recently reported earnings report contained a “mixed set of numbers” and said:
Let’s talk about the recent resurgence in housing after a long period where this whole industry was a black eye on the face of the stock market. Yesterday morning, we got results from D.R. Horton… No, on the surface, I get it, Horton reported a mixed set of numbers. But the stock still surged nearly 6% yesterday in response because there were some real positives underneath. And if we can get another rate cut from the incoming Fed chief, this entire industry could get a real boost. It almost always does when you get a rate cut… If you’re wondering why these results sent the stock up 6% yesterday, I still don’t blame you.
I mean, the truth is very simple. Horton’s forward-looking metrics were encouraging. Whether you’re talking in terms of units or dollars, Horton had much better than expected numbers across the board… Frankly, that consistent kind of talk was all the bulls needed. The home builders had gotten rolling when long-term interest rates peaked in late March. And this better-than-expected commentary from D.R. Horton allowed investors to feel even more confident placing bets on the stock…
Now, all that said, this comeback in D.R. Horton and the rest of the home builders is only sustainable if rates keep coming down. The group is hostage to the bond market and, to a lesser extent, the Federal Reserve. A flare-up with Iran and a spike in interest rates could cause this move to fall apart rather quickly. On the other hand, if we do see President Trump’s pick for Fed chairman, Kevin Warsh, confirmed… and he’s able to sway enough Open Market Committee members toward the lower rates camp, and I think he can with those who don’t like him saying they abstain, then this could just be the beginning of a fabulous next leg for Horton and the home builders.
But the bottom line: The report yesterday morning from D.R. Horton, while far from perfect, had enough good news to keep us interested in the home builders here. The biggest surprise was the resiliency of demand in the quarter. We didn’t get all that much relief on interest rates, but we still saw a surge of orders, and that bodes pretty well for Horton and its competitors in the future. Now, we just need some more cooperation from the bond market. Without that, I can’t justify getting too bullish. But for the time being, I gotta say, these numbers left me feeling pleasantly surprised and justified the move.
D.R. Horton, Inc. (NYSE:DHI) builds and sells single-family and multi-family homes across the U.S.
