I'm Still Sold on Homebuilders

After last week's holiday-shortened trading week, we have our first full trading week of the second half of 2017. It was a listless week of trading despite monthly jobs numbers that easily beat expectations. We're now on the cusp of second-quarter earnings season, and expectations for a solid quarter of growth are high. The consensus calls for 8% year-over-year growth in earnings on approximately a 4.5% increase in revenue. While the consensus is down from the just over 10% growth expectations when the quarter began, investors are expecting a good quarter for earnings. Whether the stock market continues to grind higher will depend to a great extent on whether companies beat those expectations.

One area of the market that I do expect to continue to post solid earnings numbers are the homebuilders. My regular readers know that this sector has been the second-highest allocation in my portfolio for almost a year and a half now. While somewhat bumpy, the sector has rewarded my faith with a significant bout of outperformance overall. After a decade of below-trend housing starts, solid job growth and mortgage rates that are still historically low, I expect this to continue to be a secular trend that plays out many years....299 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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