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Marshall Hargrave
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Former registered investment adviser rep and current entrepreneur. Now running an equity research company. Affinity for activist campaigns and targeted stocks. Check out our newsletter and activist model portfolio at stockpucker.com and follow us on twitter @stockpucker
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  • Which Is The Best Homebuilder For 2014? 0 comments
    Feb 4, 2014 2:37 AM | about stocks: DHI, PHM

    D.R. Horton (NYSE:DHI) is the nation's leading home builder. Thus, assuming the rebound in the housing market continues, D.R. Horton should be one of the biggest benefactors. And the company is making a number of key moves to help set itself up for an even better 2014.

    The broader tailwind should be a continued recovery of the housing market. Interest rates are still at historical lows. A pickup in employment should also help boost the supply for housing. As the housing market returns to its pre-downturn level, it will drive employment upward and build consumer confidence, thus providing stimulus to the overall economy.

    Though the sales pace has slowed down slightly after interest rates started increasing, it is generally believed that this is only temporary and demand should go up once consumers adjust to both higher rates and increased pricing.

    D.R. Horton is also turning toward move-up buyers, which demand larger and a more upgraded homes. These homes are higher priced and boost profitability. During fiscal 2013, its average sales were up 16% year over year.

    The beauty of D.R. Horton is that it's the largest homebuilder in the U.S. The company has a solid return on equity at 13% and trades at less than 12 times forward earnings.

    On the other hand, PulteGroup (NYSE:PHM) beat its bottom line thanks to higher prices and margins offset a slowing sales pace. For 2013, home sales revenue were up 9% year over year. PulteGroup repurchased some two million shares for $35 million. As well, the homebuilder managed to lower its debt-to-capitalization ratio of 31%, down from 53% a year ago. PulteGroup saw its average closing price grow 13.2% year over year during 4Q 2013

    Both PulteGroup and D.R. look to be solid investments in the housing space and are our best picks for 2014.

    Stocks: DHI, PHM
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