Contrarian investing works. With many people still adverse to real estate market risk, now is a time that bold investors can still pick up bargains in the home construction market sector. These stocks promise strong return in the next year. These companies have weathered the worst of the credit crunch and are poised to fill the vacuum left by weaker competitors. There are some strong, publicly traded home construction companies that are ready for the smart investor to seize as part of the overall market opportunity.
The first company to look at in the near term is Toll Brothers Inc. (NYSE: TOL). Toll Brothers Inc. (NYSE: TOL) is a full-service provider of attached and detached luxury homes. Based in Horsham, PA, Toll Brothers Inc. (NYSE: TOL) designs, builds, markets and arranges financing for luxury homes. They are primarily focused on a mature-customer home construction, catering to people who are either upsizing or downsizing but that demand a certain level of quality and luxury in their communities. Many of the Toll Brothers’ planned communities include golf courses, owned and operated by the corporation. Toll Brothers Inc. (NYSE: TOL) is currently trading below its book value, and has strong free cash holdings. This is a financially sound company with a realistic growth potential of up to 25% in the next year.
It is also time to invest in Centrex CP (NYSE: CTX). Currently well under $10 a share, Centrex CP (NYSE: CTX) promises to be the bold investors’ bargain stock. Centrex CP (NYSE: CTX) is positioned to take advantage of improvements in any market sector. With operations in 22 states and 75 different markets, Centrex CP (NYSE: CTX) has the flexiblity to shift operational focus to the segment with the most upside potential. The potential exists for either a huge upside this year or low double-digit growth over the next three. Only time will tell if this home construction long shot will truly pay off.
Finally, another bargain poised for great gains in the next year is DR Horton, Inc. (NYSE: DHI). As the third leg in the power-builder stool, DR Horton, Inc. (NYSE: DHI) currently trades under $10 per share, yet the company continues to enjoy some of the best profit margins in the home construction industry. While they are not currently showing a profit, the 5 year dividend for this company was over 2.3%, indicating a corporate management team that understands how to return value to the stock holder. Look for DR Horton, Inc. (NYSE: DHI) to lead the rebound in the home construction sector.
Home construction will continue. As mortgage rates return to their historic lows, these companies have the cash positions to take advantage of the opportunity to expand into the vacuum left by less-fiscally robust private companies that have folded during the bust. The depth provided by publicly traded stock has helped these home construction companies emerge on the tight side of the bust.