Anthony Speciale Stock Market Analyst

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3 real estate stocks even hotter than the market

Speaker 1 (00:00):
Hi guys, I’m Tim Melvin. And welcome back to, it’s a better way to wealth. Not yesterday. We talked about the ongoing housing boom, and the fact that a lot of people in the media, you’re talking about housing slowing down, and we may see a minor slowdown, but guys, this boom is going to last a long time because this is not just COVID related. COVID part of it. But this is millennial demand. The millennial generation finally growing up, having kids and looking around and going, Hey, you know, schools and shopping may have be actually more important to my life today than the ability to get high food at three in the morning in a downtown location. So we are seeing a move out to the suburbs and the problem is there’s not enough supply to meet the demand. Builders have not been able to keep up.

Speaker 1 (00:47):
And as we talked about yesterday, part of the problem is, you know, significant percentage of 60% of the homeowners are, you know over 65, they have absolutely no desire, inclination or incentive to sell their home at this point in time, creating a shortage. So there’s going to be a lot of money made by people that are working in and around the industry, helping people get new homes. So let me give you my three favorite picks and we’re going to go think out of the box here. Most of the home builders will love them a year ago. We love them two years ago. They’ve really moved up quite a bit of price for traditional builders. So we’re gonna wait for pause and no. So let’s come from outside the box and give you three stocks. It can make you an enormous amount of money over the next several years.

Speaker 1 (01:27):
First up is Sterling construction. I love this company I’ve been involved in it before Sterling construction, symbols, STR L you think of them as a heavy infrastructure civic construction company, and they do a ton of that business folks. They work on roads, railroads, bridges, airports, water systems, all types of civil infrastructure, which means of course, they’re in a great position to get a massive influx of cash in their key markets from the eventual passage of an infrastructure bill. Once Congress has done torturing everybody by delaying it once again and again and again, it’ll get passed. The money will get spent. Sterling’s going to get a lot of it. The exciting part of this business to me is the fact that several years ago, Sterling bought a company that goes in and they do the foundations for residential construction in large neighborhoods and projects, which are pretty much all that gets built anymore.

Speaker 1 (02:23):
Subdivisions, very fast cash cycle, as opposed to it civil construction contract. And it has much higher profit margins. And they’re growing that part of the business steadily right now, they’re doing most of their business in their home markets. That’s Dallas and Houston, Texas. They have significant market share in those markets have this, this, you know residential construction foundation business, and then just expanded it into Phoenix. They’re going to keep expanding that business at a smart, slow, steady, measured pace. They want the business to eventually be about half of the total company. It’s, I’m going to say between 12 and 15% right now, they want it to be half because it is a higher margin, shorter cash cycle business. So that’s going to be a massively fast growing part of Sterling construction. Now, right now, this is going to be a very high growth high margin company compared to other construction companies going forward.

Speaker 1 (03:18):
And you’ve got two powerful, long lasting tailwinds behind it. One is infrastructure spending. The other is of course the boom and in demand for residential homes, they’re going to be laying a lot of foundations for many years still to come. So Sterling construction, S T R L. Now the next one is a company that I really like this company, legacy housing Legh they do manufactured home communities, standalone manufactured homes and folks. They build tiny homes. Look, they’re a big craze right now. A lot of folks are moving into these tiny little, they can build one for as little as 22,000. So this is an answer to some of the high costs and affordability measures in certain parts of the country. They’re mostly active in the Southern part of the United States, where we see a lot of manufactured homes and manufactured home communities. And I guess going forward, we’re going to see a lot more with little homes.

Speaker 1 (04:19):
We’re even seeing some cities do large scale buying of literally little homes to attempt to solve the homeless problem. I actually think it’s going to be a fast growing business for legacy homes over the next decade or so the numbers here are pretty good. The stock is selling it about 10 times insiders own about 40% of the company. So they have a ton of skin in the game and we’re for them to do well. They have to let us do well and participate in the rise of the stock price that I think is going to happen over the next several years. Also. Absolutely do not be shocked if we see a takeover come in for this business, it’s a good business with decent margins and there’s several other players in here that boy, this might be an outstanding fit since insider’s in 40%, it’s going to have to be a price that they like, but let’s not rule that out the company because of the, you know, really attractive valuation, the stock, and the fact that it’s into a very unique niche part of the business Cody track to take over awkward.

Speaker 1 (05:17):
At some point I would not be shocked at all. Now my final pick has to be a home builder right now. My final pick is here’s a shocker for those of you that have known me for awhile. It’s a bank that does a lot of residential mortgage lending, a Northwest national bank, great bank, $14 billion in assets. It’s in Western central Pennsylvania. It’s in Western New York and Eastern Ohio all told they have about 174 branches. As I said, 14 billion in assets. They have a 35% of their, their loan portfolio guys is in a single family home lending. And there’s about another $1.8 billion worth of government mortgage backed securities on the balance sheet. That’s a significant portion of the bank’s total assets and security portfolio. This is a fantastic bank. They’re extraordinarily shareholder friendly. How friendly guys the dividend on this is 6%. That’s one of the highest yields of all the bank stocks with which I’m familiar.

Speaker 1 (06:22):
The dividend has been raised continuously the rates about 6% a year, which is decent. That’s very good. And they just raised it earlier this year. And you know, the safest evidence is the one that just got increased. And that’s the case here. We’ve got insiders only about 5% of the bank. So again, we’ve got some skin in the game here in order for them to do well. We have to do well continued mortgage demand is going to just continue to drive their loan book. They’re very good at what they do. Loan losses are very reasonable. They have plenty of capital on hand. The fed has signed off on their capital plan. So they’re good to go to keep paying dividends. Mike, buy back a little bit of stock at some point in time. The bank is trading at point, not to me district

Speaker 2 (07:06):
Two to 6% anymore, but trading right around book value and at 10

Speaker 1 (07:11):
Times earnings. So it’s very attractively priced. Again. They have a pretty good size market. So if anybody looked around and said, Hey, we really want to be in those markets. Banks are in a consolidation phase and have been for decades. These guys would make a very attractive takeover target for a larger bank, looking to expand into that Northeastern section of the Midwest of the United States. So anyway, guys, there’s three stocks that should do very well because of the long housing boom that I see ahead as millennials continue to have kids and make babies grand babies, as I like to call them. And you know, the amenities of a community become more important to them and being in the, you know, the heart of the central business district COVID has played a role it’s millennial family formation, even more, that’s going to drive continued housing demand. These strikes will make you an enormous amount of money. So anyway, I’m Tim Melvin, that’s been a better way to wealth and thanks for watching.