After nearly three months of selling pressure, shares of homebuilders D.R. Horton (NYSE:DHI), KB Home (NYSE:KBH), and Lennar Corp. (NYSE:LEN) have jumped by nearly 24%, 23%, and 22%, respectively, over the past month.
The selling pressure arose as longer-term mortgage rates reached their highest level in over two decades amid the Fed’s inflation fight. Curiously, though, house prices have remained elevated this year, primarily due to low inventory levels.
Additionally, these names received a boost this month after the latest inflation print pointed to easing inflationary pressure. This, in turn, raised hopes of a softer stance from the Federal Reserve.
Furthermore, these companies have posted relatively stable revenues and increasing profits over the past three quarters. This has meant that even during a year of higher rates and tightening consumer budgets, shares of DHI, KBH, and LEN are still up by about 54%, 75%, and 50%, respectively, over the past year.
Adding to this, the U.S. 10-year bond yield is finally starting to ease after reaching levels last seen in May 2007, and the stocks on our list today generally display a negative correlation to U.S. bond yields. While optimism about possible rate cuts abounds, DHI, KBH, and LEN also offer a dividend cushion for investors, with dividend yields of 0.79%, 1.23%, and 1.17%, respectively.
What Are the Best Construction Stocks to Buy?
In the meantime, the TipRanks Comparison Tool indicates the Street has a Moderate Buy consensus rating on all of these names, with the highest upside potential of 15% seen in DHI stock.
Read full Disclosure
