Anthony Speciale Stock Market Analyst

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Here’s Another Great Way to Play the Housing Boom

When you look at the headlines, you might get the feeling that the housing boom over the last couple of years is starting to slow down because, you know, mortgage rates are skyrocketing… Wrong!

The housing boom is not going away anytime soon. We’re short between five and six million homes to meet demand, which is why we’re seeing such incredible numbers for new home builds and even new apartment builds.

There’s a housing shortage across the entire market at the moment, and it’s not going to change anytime soon. Sure, rates have gone up a bit, but they’re still low from a historical perspective. Cash was piled up on the sidelines due to the COVID crisis, and consumers flush with that cash are now looking to leave larger cities and move to smaller towns in the suburbs. That’s creating enormous demand for homes.

Even before the pandemic, the market was short a couple million homes, and that’s only accelerated dramatically since then. So, the new home building is going to go on. Existing home sales were up 7% in September. More single-family homes are being constructed than anytime since before the great financial crisis back in 2007.

And here’s a newsflash… We’d have to pick up 50% of new houses under construction to meet 2007 levels, so we’re still not building enough homes to meet demand. And what we’ve seen is that builders are chasing the higher end of the marketplace, and that’s not working for the average Joe looking to buy a first home.

So, again, the housing boom is going to go on much longer than Wall Street possibly thinks it can. But how can we play this?

Well, last week we talked about one of my favorite REITs, BRT Apartments Corp. (BRT), which is now a high-yield momentum play as institutions are flowing into the stock and pushing it up and to the right.

Builders FirstSource, Inc.

But today, I want to tell you about another way to play the housing boom… Builders FirstSource, Inc. (BLDR), I company I first recommended back in 2018. At the time, the stock was trading for seven or eight times free cash flow, at a very low multiple of earnings and the market was really ignoring the stock.

But since then, they’ve continued to perform, and it’s turned into a smoother, up-and-to-the-right momentum stocks that has “twin momentum.” Its constantly improving fundamentals are driving money into the stock and providing that institutional buying pressure we love to see.

Now, Builders FirstSource makes just about everything you can think of to build a house or an apartment, including lumber, trusses, windows, doors, stairs, trim and roofing products and much more. Everything that goes into building a house is available at Builders FirstSource. And as you can imagine, they do a ton of business with homebuilders and contractors in all of their locations.

This company is going to have stellar fundamentals and high earnings growth for at least the next five years, which should continue to bring institutions into the stock and give Builders FirstSource the type of up-and-to-the-right momentum that can grow your money at a faster rate than you ever thought possible.