Morning Report Wednesday 21 January 2015
US Homebuilders are getting battered, are there opportunities locally?
Over the last week US homebuilding stocks have fallen ~10% in a market that has gone nowhere, albeit in an extremely volatile fashion. There has been a two prong reason for the fall in prices, a build-up of inventories and weak demand – sounds like a diluted version of the oil story. Unsurprisingly, the homebuilders are “confident going forward and expect prices of new homes to keep increasing during the year”. Overall optimism has foundation with the US economic recovery on track hence a pullback in the building sector is worth consideration.
1. Boral (BLD) – $5.22 - Dividend 2.9% fully franked – I remain neutral this long term boring stock.2. CSR Ltd (CSR) – $3.52 - Dividend 3.8% unfranked – Technically CSR offers good value around $3, but this is a sugar and building play.3. Dulux (DLX) - $5.69 – Dividend 3.6% fully franked – An excellent stock that will benefit from high housing prices as renovations increase. DLX has corrected 6% to date and I am a keen buyer under $5.25, another 8% lower.4. James Hardie (JHX) – $11.91 - Dividend 3.7% unfranked – JHX has excellent exposure to an improving US economy. Technically I am a keen buyer around $11.
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