What Is The Best Home Builder Stocks?

The home building stocks market experienced a challenging 2022, punctuated by a record 12-month fall in existing home sales through January 2023. This scenario consequently shaved off billions of dollars from the value of the 21 largest home builders in the USA, a sharp contrast to rewarding gains for shorts.

Among the most noteworthy companies is Tri Pointe Homes, Inc. (NYSE:TPH), a high-end homebuilder. Although it hasn't managed to capture the same level of hedge fund interest as its counterparts, such as Lennar Corporation (NYSE:LEN), PulteGroup, Inc. (NYSE:PHM), and D.R. Horton, Inc. (NYSE:DHI), Tri Pointe Homes has demonstrated resilience. The company aims to deliver between 900 and 1,000 homes in the current quarter and estimates to reach between 4,500 and 5,000 homes by the end of the year. The average sales price is expected to be around $690,000 to $700,000. The Third Avenue Management Small-Cap Value Fund, a consistent shareholder, pointed out the appeal of Tri Pointe's land assets in supply-constrained regions, asserting its growth potential despite industry-wide challenges.

Skyline Champion Corporation (NYSE:SKY) has also shown strength despite a decline in smart ownership over three of the past four quarters. The company has produced impressive bottom-line results in recent quarters, and its efforts in operational efficiency and customer-focused initiatives are bearing fruit. Skyline Champion Corporation reported earning $1.00 per share in its fiscal Q4, exceeding estimates by $0.07. The Wasatch Small Cap Value Fund applauds Skyline's measures to simplify its product line and sees broader industry trends, like the surge in housing demand and better financing for lower-income buyers, as tailwinds for Skyline’s stock.

Taylor Morrison Home Corporation (NYSE:TMHC), despite an 8% year-over-year decrease in home closings in Q1, has pulled off solid top and bottom lines with its recent quarterly results. The company's projected target for the current fiscal year is to close between 10,000 to 11,000 new homes at an average selling price of $625,000.

Companies like KB Home (NYSE:KBH) and M/I Homes, Inc. (NYSE:MHO) have shown promise in terms of order improvements despite hitting significant hurdles in 2022's final quarter. KB Home has seen its shares rise by 53% this year, and it projects between 3,000 and 3,700 orders in the second quarter. M/I Homes hit record revenue of $1.22 billion in Q4 and expanded its operating margin by 1.4 percentage points to 25.7%.

Meritage Homes Corporation (NYSE:MTH) also displayed robust Q4 results with a 29% year-over-year growth in home deliveries and a 32% increase in home closing revenue. However, the company saw its orders drop by 46%. Meritage Homes still managed to please its shareholders by initiating a quarterly dividend of $0.27 per share.

Among the leading home builders in America is NVR (NYSE:NVR), serving homebuyers in 31 metropolitan areas across 14 states through its subsidiary brands. The company holds a significant market cap of $11 billion, with total revenue of $7.4 billion generated in 2019. Another crucial player is D.R. Horton (NYSE:DHI), primarily focused on building single-family detached homes across 98 markets in 31 states.

PulteGroup Inc (NYSE:PHM) operates as one of the largest homebuilders in the United States, spanning 40 markets across 23 states. Skyline Champion Corp (NYSE:SK.

The tumultuous real estate market of 2022 brought about a steep decline for home builder stocks, resulting in windfall profits for those betting against them. Despite this, a glimmer of hope is evident as we transition into 2023, in the form of promising prospects within the sector.

One of these prospects is Tri Pointe Homes, Inc. (NYSE:TPH). While this stock has not caught the attention of hedge fund investors in the same way as Lennar Corporation (NYSE:LEN), PulteGroup, Inc. (NYSE:PHM), and D.R. Horton, Inc. (NYSE:DHI), its future prospects are not to be discounted. Despite current hedge fund interest being at a four-year low, Oppenheimer analyst Tyler Batory highlights its potential for growth beyond California. The company is forecast to deliver between 900 and 1,000 homes in the current quarter and between 4,500 and 5,000 homes this year, at an average sales price expected to be between $690,000 and $700,000. In addition, Tri Pointe Homes' noteworthy land assets and proven ability to grow intrinsic value in a challenging cost environment is highlighted in the Q4 2021 investor letter of the Third Avenue Management Small-Cap Value Fund, a long-standing TPH shareholder.

Another company to keep an eye on is Skyline Champion Corporation (NYSE:SKY). Despite some volatility in smart ownership, it's still among the top 10 best home builder stocks to buy. Skyline Champion Corporation has demonstrated strong bottom-line results in recent quarters as a result of improvements in operational efficiency and the success of their customer-focused initiatives. Their backlogs have begun to stabilize, offering a promising outlook for the near future. Wasatch Small Cap Value Fund has also acknowledged the company’s success in simplifying its product line in their Q4 2021 investor letter.

Taylor Morrison Home Corporation (NYSE:TMHC) has shown a 32% increase in hedge fund ownership during Q1, launching it into the top ten most popular homebuilders among hedge funds. Despite a decrease in home closings in Q1, the company exceeded both top and bottom line expectations in its latest quarterly results. They project closing between 10,000 to 11,000 new homes in the current fiscal year, at an average selling price of $625,000.

Similarly, KB Home (NYSE:KBH) experienced a temporary dip in smart money shareholders during Q2, but quickly bounced back. Despite a significant orders miss in Q4 of 2022, KB Home shares have managed to gain 53% in the current year. The company has also seen recent improvements in orders and has a substantial backlog, signalling a potential for robust growth in the upcoming months.

With a 21% increase in hedge fund ownership in Q1, M/I Homes, Inc. (NYSE:MHO) hit an all-time high in smart money shareholders. Despite a decrease in orders during the fourth quarter, a resurgence in December and January indicates promising signs of recovery. The Miller Value Deep Value Strategy fund has recognized the long-term tailwinds for homebuilders like M/I Homes, Inc., citing favourable long-term supply/demand picture for the industry.

Other notable companies to keep on the radar include Meritage Homes Corporation (NYSE:MTH), which has seen a 19% quarter-over-quarter increase in the number of funds holding long positions, and NVR (NYSE:NVR), a leading home builder based in Virginia that generated total revenue of $7.4 billion in 2019.
Leading homebuilder D.R. Horton (NYSE:DHI) 

, a leading homebuilder with operations in 98 markets across 31 states, primarily builds single-family detached homes and also offers mortgage financing and title agency services. In its Q2 2023 earnings report, D.R. Horton reported solid results, with a 15% increase in consolidated revenues and a 20% increase in homebuilding revenues, compared to the same period last year. Its robust order book and strong demand in the housing market position it for further growth in 2023.

Similarly, Toll Brothers, Inc. (NYSE:TOL) is another promising prospect. This Pennsylvania-based company is a luxury homes builder with operations in 24 states. Despite the challenges posed by the COVID-19 pandemic and supply chain issues, Toll Brothers has shown resilience with steady revenue growth and stable margins. The company's targeted approach towards affluent buyers and its expansion into the affordable luxury segment suggest a bright future for its stock.

Our Pic For The Best Home Builder stocks :
D.R. Horton, Inc. (NYSE:DHI) , Taylor Morrison Home Corporation (NYSE:TMHC) , Tri Pointe Homes, Inc. (NYSE:TPH) , Skyline Champion Corporation (NYSE:SKY) ,  KB Home (NYSE:KBH)

1. Strong Financials and Consistent Performance: D.R. Horton, Inc. (NYSE:DHI) has consistently shown strong financial performance and operates across a large number of markets, offering a diverse portfolio.

2. Rapid Growth: Taylor Morrison Home Corporation (NYSE:TMHC) has shown significant growth in hedge fund ownership, which can be a promising sign of a stock's potential.

3. High Potential/Undervalued: Despite its lower recognition, Tri Pointe Homes, Inc. (NYSE:TPH) has been noted for its potential for growth and intrinsic value.

4. Stability and Efficiency: Skyline Champion Corporation (NYSE:SKY) has demonstrated strong results due to improvements in operational efficiency and is a part of the top 10 best homebuilder stocks.

5. Strong Order Backlog: KB Home (NYSE:KBH) has seen recent improvements in orders and has a substantial backlog, which can signal potential for future growth.