by Stephen Leeb, editor The Complete Investor
The Federal Reserve will continue to buy mortgages, keeping long-term
interest rates exceptionally low. Existing home sales have continued to
improve from their 2010 lows. And while home prices are starting to
rise, they still remain quite affordable by historical standards.
these factors working in their favor, it's not surprising that housing
stocks have been outstanding performers in the past year or so – with
plenty of upside room to grow. Here's a look at our favorites.
Home builder NVR Inc. (NVR) is a truly outstanding pure play in housing with no debt, healthy free cash flow and excellent growth prospects.
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This extremely well-run company managed to remain profitable throughout
the housing sector crash and is now well positioned to thrive during the
We also like real estate developer Toll Brothers (TOL),
whose operations are centered on luxury residential communities in 21
states across the U.S. This segment of the market has been the most
resilient in the housing downturn and should likewise fare best as the
In the "related companies" category, Wells Fargo (WFC)
is a strong pick as the nation's largest originator of mortgages, with
Warren Buffett being the company's biggest shareholder. With the stock
trading at less than 9 times 2013 earnings, it's clearly undervalued.
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We'll also mention Masco (MAS),
a Fortune 500 company that focuses on manufacturing and distribution of
building products and branded consumer products for the home
improvement and construction industries – and it's Home Depot's largest
So our message here – and corresponding stock picks –
remain consistent and clear. Look to a reviving housing and real estate
sector as an essential component of the recovery.
And your best
bets on this trend will be those housing and housing-related companies
with strongfundamentals, sound management and solid growth prospects in
their own niche within this space.