In light of surging home prices, five homebuilding stocks that have outperformed the Standard & Poor’s 500 Index during the first half of 2021 are LGI Homes Inc. (LGIH, Financial), Skyline Champion Corp. (SKY, Financial), Century Communities Inc. (CCS, Financial), Hovnanian Enterprises Inc. (HOV, Financial) and Toll Brothers Inc. (TOL, Financial) according to the All-in-One Screener, a Premium feature of GuruFocus.
Homebuilding stocks jump on increasing home prices
Homebuilding stocks like Lennar Corp. (LEN, Financial) and PulteGroup Inc. (PHM, Financial) increased approximately 2% on Tuesday on the back of home prices increasing more than 14% in April compared to the prior year according to the S&P CoreLogic Case-Shiller National Home Price Index. Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices said that April’s surge was the largest gain in more than 30 years, with several cities observing their largest annual gains ever.
Lazzara added that the gains are consistent with the suggestion that the coronavirus pandemic drove potential buyers from urban apartments to suburban homes, strengthening the housing market.
As such, investors may wish to consider homebuilding stocks that have outperformed the S&P 500 benchmark over the past six months. GuruFocus’ All-in-One Screener listed five homebuilding stocks that have outperformed the S&P 500 benchmark by at least 14% since January.
LGI Homes
Shares of LGI Homes (LGIH, Financial) traded around $160.21, outperforming the S&P 500 by approximately 27.05% during the past six months. The stock is modestly overvalued based on Tuesday’s price-to-GF Value ratio of 1.28.
GuruFocus ranks the Texas-based company’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and an operating margin that has increased approximately 2.2% per year on average over the past five years and is outperforming over 80% of global competitors.
Gurus with holdings in LGI Homes include Chuck Royce (Trades, Portfolio)’s Royce Investment Partners and Lee Ainslie (Trades, Portfolio)’s Maverick Capital.
Skyline Champion
Shares of Skyline Champion (SKY, Financial) traded around $55.59, outperforming the S&P 500 by approximately 54.41% over the past six months. The stock is significantly overvalued based on Tuesday’s price-to-GF Value ratio of 1.92.
GuruFocus ranks the Troy, Michigan-based company’s financial strength 8 out of 10 on several positive investing signs, which include a high Altman Z-score of 7.58 and cash-to-debt and debt-to-equity ratios outperforming more than 83% of global competitors.
Gurus with holdings in Skyline include Mario Gabelli (Trades, Portfolio)’s GAMCO Investors Inc. (GBL, Financial) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Century Communities
Shares of Century Communities (CCS, Financial) traded around $68.47, outperforming the S&P 500 by approximately 30.62% over the past six months. The stock is significantly overvalued based on Tuesday’s price-to-GF Value ratio of 1.48.
GuruFocus ranks the Greenwood Village, Connecticut-based company’s profitability 7 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8 and returns outperforming more than 80% of global competitors.
Hovnanian Enterprises
Shares of Hovnanian Enterprises (HOV, Financial) traded around $106.63, outperforming the S&P 500 by approximately 173.16% over the past six months. The stock is significantly overvalued based on Tuesday’s price-to-GF Value ratio of 3.06.
GuruFocus ranks the Matawan, New Jersey-based company’s profitability 5 out of 10: Although the company’s net margin and return on assets outperform over 90% of global competitors, Hovnanian Enterprises’ three-year revenue and earnings growth rates underperform more than half of global residential construction companies.
Toll Brothers
Shares of Toll Brothers (TOL, Financial) traded around $58.12, outperforming the S&P 500 by approximately 14.29% over the past six months. The stock is modestly overvalued based on Tuesday’s price-to-GF Value ratio of 1.14.
GuruFocus ranks the Pennsylvania-based company’s profitability 7 out of 10: Even though profit margins and returns outperform just over half of global competitors, Toll Brother’s three-year revenue growth rate of 16.30% outperforms 79.82% of global homebuilders.
