Our FMHQ (Friday Morning Housing Quant) tables present the state of the publicly traded homebuilders in a visually-friendly, quantitative format that takes about 60 seconds to consume.
Quick Quant Takeaways:
Housing Macro | Election Cycle: We profiled the stark and recurrent pattern of housing performance alongside the election cycle last month (see: Election Cycle Analysis --> Will Housing Trump the Market?). The behavioral underpinning is relatively straightforward – housing is the largest, mostly broadly held asset in the country and populist pandering does not include policy platforms anchored on crushing the primary or singular source of net wealth for a significant percentage of households. According to the NHBR (Here) early evidence out of New Hampshire suggests housing again sits as a central topic of constituency concern. According to the UNH Survey, “ 90 percent of Granite Staters say housing affordability is a problem in New Hampshire, and three-quarters say presidential candidates should focus on it … only 13 percent say the candidates should put “no focus” on it.” The drumbeat of housing-as-an-issue newsflow is likely to only get more steady from here. Moreover, recent chatter has HUD Secretary Julian Castro (HERE) being mentioned as a potential VP candidate for Clinton.
- Performance Roundup: Housing stock returns are off to a solid start thus far in 4Q15. The absolute returns for ITB and XHB are +4.3% and +4.1% 4QTD vs the S&P 500 +5.4%. Meanwhile, the average builder QTD return is +5.5%, but this is positively skewed almost +200 bps by HOV, which is +23.7% QTD. Our preferred four horsemen among the builders are KBH, BZH, LEN & NVR (+5.1%, +5.7%, +3.4%, +2.3%).
- Valuation: The cheapest names in the group currently are BZH (8.9x), TMHC (9.5x) and MTH (9.6x), while the most expensive are NVR (14.6x), LEN (13.2x), and TOL (13.2x).
Joshua Steiner, CFA
Christian B. Drake