A number of stocks started to rally on news that pending home sales were much stronger than expected. A recent article summarizes the positive news in detail:
"Today, the National Association of Realtors reported that U.S. pending home sales rose 7.3% in November. This is the highest level of homes in contract in a year and a half. A Bloomberg survey forecast that November growth would only be 1.5%. Consumers were buoyed by home prices and interest rates that have continued to remain low. The housing industry has shown signs of life as construction in new homes have increased and more have been purchased."
The housing data is another sign that the economy could be turning a corner. Recently, the unemployment figures also showed some improvement and so did consumer confidence numbers. If you combine increased home sales, a stronger job market, and the resulting increase in consumer confidence, it might make for a major uptrend in a number of stocks that are related to housing. Plus, if housing recovers, it could take up almost every part of the economy, including sectors like autos, hotels, etc. Here are stocks that could see major gains in 2012, if the data continue to trend higher:
Home Depot, Inc. (NYSE:HD) operates a nationwide chain of home improvement stores. This company offers just about everything needed to build or improve a home and excellent management as well. The stock has been in an uptrend and the stock looks poised to hit new 52-week highs soon. I would consider buying Home Depot on any significant pullbacks.
Here are some key points for HD:
Current share price: $42.01
The 52-week range is $28.13 to $42.47
Earnings estimates for 2011: $2.39 per share
Earnings estimates for 2012: $2.73 per share
Annual dividend: $1.16 per share, which yields 2.7%
Furniture Brands International, Inc. (FBN) is a major furniture design and manufacturing company with popular brands such as Henredon, Broyhill, Lane, Thomasville, Drexel Heritage, Pearson, Laneventure, and others. This stock appears to be poised for a rebound after a very tough 2011. Investors are just starting to bid up the stock from recent lows in anticipation of improving sales from furniture companies since they benefit from stronger housing and jobs data. This stock could easily double or triple from the very low levels it currently trades at.
Here are some key points for FBN:
Current share price: $1.21
The 52-week range is 88 cents to $5.43
Earnings estimates for 2011: a loss of 58 cents per share
Earnings estimates for 2012: a loss of 13 cents per share
Annual dividend: None
Caterpillar, Inc. (NYSE:CAT) is a leading maker of heavy equipment, which includes machinery for agricultural, mining and construction. Caterpillar is likely to see rising demand for farm and heavy equipment as the population grows. Furthermore, if home building and construction activity picks up, demand for heavy machinery will rise.
Here are some key points for CAT:
Current share price: $90.58
The 52-week range is $67.54 to $116.55
Earnings estimates for 2011: $6.79 per share
Earnings estimates for 2012: $9.03 per share
Annual dividend: $1.84 per share, which yields 2%
Lowe's Companies, Inc. (NYSE:LOW) is a leading home improvement chain that competes with Home Depot and other retailers. This stock has been making solid and consistent gains ever since October. It looks poised to extend these gains as the housing and job market data continue to improve. There is a good chance it will dip to about $24 per share in a market correction, and that would be a better entry point.
Here are some key points for LOW:
Current share price: $25.68
The 52-week range is $18.07 to $27.45
Earnings estimates for 2011: $1.61 per share
Earnings estimates for 2012: $1.78 per share
Annual dividend: 56 cents per share, which yields 2.2%
Masco Corporation (NYSE:MAS) makes a wide variety of products for the home such as: architectural products, cabinets, doors, windows, faucets, bathtubs and many other items. Masco has been impacted by the recession and housing downturn so any turnaround could result in much higher profits. This stock jumped about 8% after the housing data release, and it could be starting a new uptrend.
Here are some key points for MAS:
Current share price: $10.70
The 52-week range is $6.60 to $15.03
Earnings estimates for 2011: 7 cents per share
Earnings estimates for 2012: 31 cents per share
Annual dividend: None
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I am long FBN.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.