If Thursday's move into real estate stocks is reflective of a bigger trend, there's still time to make winning investments in the housing sector. The SPDR S & P Homebuilders ETF (XHB) and the iShares U.S.
Home Construction ETF (ITB) both ended the week more than 10% higher. That marked both of their best weeks in 2024. A large chunk of those gains came Thursday, as investors assumed the consumer price index reading could give the Federal Reserve justification to start cutting interest rates.
As big technology stocks tumbled, traders jumped into real estate-connected holdings on a hunch that the sector would benefit from a lower-rate environment. If this week is any indication of what to expect going forward, stocks tied to homebuilding could be in for more upside. Due to this, CNBC Pro screened for the most-loved names among this group.
To find them, CNBC Pro looked for stocks in either of the exchange-traded funds that had buy ratings from at least 55% of analysts and an average price target suggesting upside of at least 10%. Here are the five that made the cut, according to FactSet data as of Thursday night: Homebuilder Toll Brothers passed the screen. Exactly 55% of analysts rate the stock a buy, with an average price target showing shares can rise close to 15%.
It has been a solid year for the stock, with shares up about 20% in 2024. Wells Fargo analyst Sam Reid named Toll Brothers his top builder pick due in part to its status as a structural share gainer and its historically cheap valuation. The stock "seems like a counterintuitive pick in a mushy macro," Reid wrote to clients late last month.
"But we see a few silver linings." TOL YTD mountain Toll Brothers, year to date Housing product maker Azek was another name on the list. About 2 out of every 3 analysts rate the stock a buy, and the average price target implies shares can climb almost 20%.
That would build on 2024's gain of around 14%. Benchmark analyst Reuben Garner joined the bull camp earlier this year, calling the company "the most expansive producer of outdoor living products." This emphasis on outdoor materials should serve Azek well as the category gains traction, he said.
"We believe the top to bottom focus on becoming the largest player in the space has come at the perfect time," he said. "The high growth profile of the business and management's outstanding track record leads us to believe Azek is primed to take advantage of a secular boom in outdoor living." Furniture stock Arhaus also had about 2 out of every 3 analysts holding buy ratings.
After a strong year with shares climbing more than 36%, Wall Street sees more room to run. The average price target reflects further upside of more than 16% over the next year. Last month, Barclays analyst Seth Sigman listed Arhaus as a company to like in the current retail backdrop.
That is because it is gaining market share, a tactic Sigman said can help offset weak demand trends seen broadly..
