The SPDR S&P Homebuilders ETF down more than 25% for the year is an opportunity for investors to play the valuation story, says the President of Grace Capital.
Faddis remains constructive on homebuilders
Real estate stocks might have been weak in 2022, but Catherine Faddis is convinced the underlying market is not. Defending her bull case on CNBC’s “Worldwide Exchange”, she said:
Now is a good time to invest in real estate because this is not 2008. These stocks are trading like we just came out of a housing crisis. We haven’t. We’ve moderated from past two years’ frenzy, but housing market is still very strong and rents are sky high.
The U.S. has underbuilt houses over the past decade, now short of more than 5 million – an estimate that adds to Faddis’ confidence in the “homebuilders”.
Faddis’ favourite stock in the real estate space
One of her top picks in this space is the Pennsylvania-headquartered Toll Brothers Inc (NYSE: TOL) that’s lost 30% since the start of 2022. Explaining why on the CNBC interview, she said:
Love the management, super smart. $6.0 billion market cap and it’s trading at five times PE. Yield of 1.60%, it’s trading a little over book value. This is just absurd. It’s too cheap to ignore.
Last week, Toll Brothers reported market-beating results for its fiscal second quarter and reiterated that any fundamental drivers of housing demand were still firmly in place.
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