Chris
Engineer & Entrepreneur, Equity/Crypto Swing Trader, Macro & Trade Setups
US homebuilders look attractive because America remains structurally undersupplied with housing, and Berkshire Hathaway is buying quality builders while Wall Street focuses on near-term affordability pressure. Berkshire added about 2.74 million Lennar shares as elevated mortgage rates weigh on builder valuations, after acquiring Taylor Morrison and investing in D.R. Horton and NVR. Follow the smart money, but always mind the price. x.com x.comÂ
Homebuilders such as Builders FirstSource are priced like trash, so any improvement in rate expectations should send them higher. Pricing in two or three rate hikes by year-end looks wrong with oil falling to $75, AI acting as a productivity tailwind and the midterms approaching. x.comÂ
Homebuilder stocks could fall close to 80% even if home prices drop only 30-40%, so the two shouldn't be compared directly. Real estate could be in for a rough couple of years. x.comÂ
Home Depot and homebuilders look awful and have broken below support. Both offer a lot of value and are way oversold, but they need interest rates, inflation and oil to come down before they can recover. x.comÂ
Homebuilders are cyclical stocks tied to interest rates, which makes them unappealing. x.comÂ
Tech should keep leading while energy, materials, real estate, homebuilders, consumer discretionary and retail suffer, because the narrative behind current leadership is a massive productivity boost, fewer human work hours and massive deflation, as Jeff Bezos describes. Communications, financials and industrials should do alright. Within tech, hardware and semis lead while e-commerce and fintech lag, but chasing current leaders rarely works. x.comÂ
As the AI infrastructure crash takes form, its recessionary effect suppresses bond issuance and powerfully caps yields, giving battered housing, mortgage and related stocks a lift. Starwood Property Trust, Rocket Companies and Builders FirstSource should get a powerful boost as yields fall, with huge short covering and fundamental improvement; many in the group trade well below book value. x.com x.com x.comÂ
Home construction stocks are rallying as money rotates into under-owned, lower-volatility areas, helped by earnings. Regional banks, transports and medical devices are ripping too, while overcrowded, highly margined growth-at-any-cost areas such as semiconductors are being unwound. x.comÂ
Homebuilders and retailers are suffering because housing liquidity has crashed, so people stay and remodel rather than move. Many stocks, from oil to homebuilders to public storage, depend on this mobility trade, and seller-to-buyer spreads are at historic levels. Per @jonbrooks, transaction volume sits near record lows. Rising HELOC use may also signal falling disposable income. x.comÂ
Lowe's is a high-quality long-term hold to buy while housing is out of favor. Its five-year chart looks flat because of post-Covid sentiment, but its share count has fallen substantially over the past decade, and it has beaten the S&P 500 over 10 and 20 years. Q1 was a double beat with sales up 10%, though guidance spooked investors. The $210 level was the target for adding, and the timing of a housing recovery is unknown. x.comÂ