🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

KeyBanc Upgrades Homebuilders - Early Pain Equals Early Gain

Published 19-09-2022, 10:00 pm
© Reuters.
DHI
-
LEN
-
KBH
-
PHM
-
MTH
-
TOL
-
BLD
-

By Sam Boughedda

A KeyBanc Capital Markets analyst upgraded the firm's stance on homebuilders to Overweight from Underweight based on their "Early Pain = Early Gain" thesis.

He told investors in a research note that, on balance, they see fundamental and rate pressure persisting but positive relative performance, supporting their upgrades.

Shares of D.R. Horton Inc (NYSE:DHI), Lennar Corp. (NYSE:LEN), Meritage Homes Corporation (NYSE:MTH), PulteGroup (NYSE:PHM), and TopBuild (NYSE:BLD) were moved to Overweight, and KB Home (NYSE:KBH) and Toll Brothers (NYSE:TOL) were moved to Sector Weight.

The analyst stated that since their January 2022 downgrade, fundamentals are weaker, credit policy is tighter, and builder valuations are lower, but the essence of their call "lies between Jessie Livermore ('There is a time to go long, a time to go short, and a time to go fishing') and Wayne Gretzky ('Skate to where the puck is going, not to where it is')."

"Financial Repression, to deflate debt, implies no Volcker 'normalization,' in our view, expressed well by Mark Spitznagel," added the analyst.

He later added that data since 1963 shows homebuilders falling 41% (28% vs. S&P) and rising 194% (141% vs. S&P) during each cycle, but what has surprised them is how early builders are compared to the market.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.