Real estate in the U.S. is finally starting to see some recovery. So you might want to consider companies with strong exposure to the building boom in the regions with the biggest potential.
But some of the best regions might be south of our border.
We?ll take a look at two companies that are in those prime areas in just a moment. For now, let?s ?
Consider the Big U.S. Reaction
To a Small New-Sales Pullback
U.S. homebuilders got hammered this week after the U.S. Commerce Department said new-home sales eased slightly in August.
Even though inventories of unsold new homes are generally trending downward, the latest figures show that new-home sales dipped 0.3%. That translates into an annual rate of 373,000 in August, from an upwardly revised pace of 374,000 a month earlier.
Dip or not, however, new-home sales are still close to their two-year high, as is construction of new single-family homes.
In other words, the news wasn?t bad ? certainly not terrible enough to warrant the pounding the stocks took. But it was less-encouraging than the previous month?s figures.
That?s because the July sales rate, originally reported at an annual rate of 372,000, represented a record 11% surge from the previous month. So the pace in August, even though marginally lower than in July, was actually 28% higher than a year earlier!
But in a market where the air has already started leaking from Ben Bernanke?s money-printing-filled balloon, it?s no surprise that homebuilder stocks are starting to lose their pop. However, don?t expect the homebuilders as a whole to stay down for too long.
Where those stocks go from here depends largely on the regional markets they serve.
Sales Slide Slightly,
But Prices Push Higher!
Regionally, gains in new-home sales of 20% in the Northeast region of the country, 1.8% in the Midwest, and 0.9% in the West were more than enough to offset a nearly 5% decline in the South.
The national median price of a new home was up too: $256,900 in August ? a 17% gain from a year earlier.
Mortgage rates are likely to remain at historically low levels for some time to come as a result of the Federal Reserve?s latest ?quantitative easing? program to purchase billions of dollars of mortgage securities.
This generosity by the Fed is likely to result in an upward momentum in demand for new and existing homes.
Eventually the stocks of U.S. homebuilders should resume their uptrend. My two favorite names are Lennar (LEN) and Toll Brothers (TOL). These have moved 150%-170% in the last 52 weeks.
But I prefer to play the housing sector by investing in markets that have not appreciated as much.
How to Build Your Global
Real Estate Empire
To get the most exposure to homebuilders outside the United States, here are two, U.S. listed, companies you might consider:
- The Mexican builder Desarrolladora Homex (HXM), with operations in Brazil as well as its home country
- And Brazil-domiciled Gafisa S.A. (GFA)
Both have been relatively volatile in recent months.
Homex, with a market capitalization of $740 million, has been trending lower since February.
And shares of Gafisa, currently capitalized by the market at $960 million, suffered a 20-month slide beginning in November 2010 that erased close to 90% of their value. However, they?ve doubled since July of this year.
Homex was flat over the last year while Gafisa was down 30%, and I?m watching for the upcoming earnings releases to decide on these two. Check out my Emerging Market Winners service for more ideas like these, plus detailed trading instructions that you can?t get anywhere else!
Until next time,
Rudy
Rudy Martin, editor of Emerging Market Winners, is widely recognized as an authority on stock and ETF investing. With more than 25 years of investing experience, Rudy started his investment career by co-managing a $2 billion private equity portfolio for Transamerica. He also served as an analyst for DeanWitter and Fidelity Investments, and research director of a quantitative research firm that is now part of TheStreet.com. Recently he has been providing his investment ideas directly to a select list of global hedge funds as Managing Director of Latin Capital Management, an institutional money management firm with more than $180 million in assets under management. For more information on Emerging Market Winners, click here.
Source: http://www.uncommonwisdomdaily.com/how-to-build-your-global-real-estate-empire-15009
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