Homebuilders to Buy into Earnings - Goldman

Goldman Sachs is recommending that investors buy the homebuilders into their earnings. They list a number of reasons for the trade:

• Home prices will remain stable as the foreclosures remain orderly, government stimulus continues to support the market.

• Earnings are stabilizing, sales trends are improving and firms are becoming profitable again.

• The Federal Tax Credit is likely to get extended into the first quarter of next year.

How to play it?

Goldman likes the homebuilders with the strongest balance sheets, cost controls, low potential writedowns and low risk of negative surprise:

The firms that fall into this category are DR Horton (DHI), MDC (MDC), Toll Brothers (TOL) and Meritage (MTH).

* Special thanks to reader Speedy who helped contribute to this piece.

Comments

[kyleco1:]

Goldman issuing buys is a sign you are too late. Watch for them selling into the buy.

Oct 19 09:28 AM