Wells Fargo & Co (WFC), Standard Pacific Corp. (SPF): Three Ways to Play the Housing Recovery

Standard Pacific Corp. (NYSE:SPF) has made certain significant investments in attractively-priced land, which will drive the company’s margins higher and post a strong growth in 2013. The key is the company’s attractive long-term land position in California, where tight existing home inventory and a shortage of finished lots should lead to above average pricing power and margins. Further acquisitions made by the company will also give attractive returns due to Standard Pacific Corp. (NYSE:SPF)’s disciplined approach and the ability to leverage its land development expertise.

The company has a large concentration in the California region with around 55% of revenue coming from the region and 55% of inventory in that region. Going forward, the company will benefit from the region’s tight home inventory.

Two fold benefits

I am encouraged by the company’s focus on aggressive growth, as well as recent announcements surrounding its combined offering. However, given the relative outperformance of the stock compared to other homebuilding peers, I continue to look for an entry point. Investors should look for a trough as an entry point.

Further, the company has plans to expand its geographical footprint within the California and the Texas regions. The land deals in these regions will enable the company quick inventory turns and redeployment of capital. Besides, the company’s focus on energy efficiency in California will benefit it in the coming quarters.

Conclusion

The aforementioned stocks are poised to benefit from a fast U.S. housing recovery. Therefore, they present an excellent buying opportunity.

Adnan Khan has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Wells Fargo. Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article 3 Ways to Play the Housing Recovery originally appeared on Fool.com is written by Adnan Khan.

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