- (0: 30 ) - Technology ETF: XLK
- (1: 35 ) - Home Construction ETF: ITB
- (4: 10 ) - Home Builders: Top Stock Picks
- (11: 00 ) - Episode Roundup : Podcast@Zacks.com
Welcome to Episode #45 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service , shares some of her top value investing tips and stock picks.
All we are hearing about right now on Wall Street is about how great the technology stocks are. Nearly every day FANG seems to be hitting new highs.
Investors are fretting that 2017 is starting to look like 1999, when investors poured into tech stocks and the NASDAQ became a bubble.
How hot is it? The Select SPDR Technology ETF (XLK) is up 18.6% in 2017. That beats the NASDAQ's return of 16.6% and crushes that of the S&P 500, which is up 8.5%.
But there's another industry that is doing even better than tech and the high growth names, yet no one is talking about it.
Tech Isn't the Only Game in Town
If you missed out on the technology rally, never fear. The housing market is just as hot as home buyers compete in cities around the country for limited inventory. Multiple bid scenarios abound which are pushing up home prices as mortgage rates remain near record lows.
What do buyers want? They want "new" and that's where the home builders fit in.
The spring selling season in 2017 has been one of the best since the Great Recession. It appears that the housing bust is finally over. We could be entering into a renaissance period for the home builders.
The Home Construction ETF (ITB) has been the place to be. In 2017, it has beaten out the Technology ETF (XLK), returning 19.6% year-to-date versus the XLK's 18.6%. It's even beating the NASDAQ at 16.6%.
Yes, housing stocks are hotter than tech stocks.
Value Stocks = When the Market is Ignoring an Industry
The home builder stocks are cheap despite soaring in 2017 as earnings are also rising.
1. Toll Brothers (TOL) said this spring was its best in 10 years. Sales are expected to rise 13.3% this fiscal year as earnings rise 43%. This luxury home builder is cheap, with a forward P/E of just 11.9.
2. DR Horton (DHI) is the largest homebuilder in America. Revenue jumped 17% in the fiscal second quarter on a strong spring selling season. It's also cheap, with a forward P/E of only 12.
3. Lennar (LEN) tells a similar story. Optimism after the election led to faster than expected sales. It's expected to report earnings again on June 20. The rest of the spring season is expected to be just as strong as the beginning of the year. Like the other home builders, its forward P/E is just 12.
Tracey likes it when an entire industry is trading cheaply. Collectively, the home builders trade with a forward P/E of just 11.3.
Additionally, the homebuilder stocks all have Zacks Ranks of #1 (Strong Buy), #2 (Buy) or #3 (Hold). Currently, there are none that are ranked #4 (Sell) or #5 (Strong Sell).
What else should you know about these hidden value stocks that are crushing it in 2017?
Tune into this week's podcast to find out.
Want more value investing insights from Tracey?
Value investors are a special breed of investor. They don't follow the herd.
If that is your style of investing, be sure to check out Tracey's weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks she thinks are the best bargains now.
The Value Investor portfolio holds between 20 and 25 value stocks for the long haul.
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