Profit Off the Housing Boom: 3 Homebuilding Stocks to Buy

During the pandemic, record low interest rates encouraged investors and consumers alike to lock in new mortgages. This surge of new buyers put a strain on the nation’s housing supply. In fact, it caused the monthly supply of new houses to hit its lowest levels since the early 2000s. Now, homebuilders are racing to catch up. This means new housing developments, lots of work for homebuilders, as well as potential gains for homebuilding stocks. With that in mind, let’s dive into a few of the best homebuilding stocks in three different categories.

Best Homebuilding Stocks

No. 1 Homebuilder D. R. Horton Inc (NYSE: DHI)

When it comes to the company that builds the newest homes in the U.S., D R Horton leads the way. D R Horton has been America’s largest homebuilder by volume since 2002. It operates in 104 markets in 32 states. In 15 of the nation’s top 50 markets, D.R. Horton is the dominant player by market share.  If you haven’t heard of D.R. Horton, there’s a chance that you know one of its subsidiaries. D. R. Horton also owns Emerald Homes, Express Homes and Freedom Homes.

One thing that makes D. R. Horton so unique is its diversification. Not only does it operate in pretty much every major U.S. housing market, but it’s also diversified within those markets. It offers homes for sale in every budget sale from under $300k to $500k+. This helps D.R. Horton maintain consistent sales regardless of the macroeconomic environment.

In 2021, D.R. Horton reported annual revenue of $27.77 billion and a net profit of $4.18 billion. 2021 was also this homebuilding stocks fifth consecutive year of revenue growth.

Best Stocks For Materials

No. 1 Sherwin-Williams (NYSE: SHW)

If you’ve ever painted a room before then you probably remember the Sherwin-Williams Co logo from your paint can. It features the globe getting a bucket of paint dumped on it. Thanks to Sherwin William’s massive reach, it’s actually not too far off from painting the world. Sherwin-Williams currently manufactures, develops and distributes paints and coat products in over 120 countries.

Perhaps the biggest reason to invest in Sherwin-Williams is its size and brand recognition. Selling paint might not seem like the biggest moneymaker. But, when you have 4,770 stores and 137 manufacturing facilities, you end up making quite a bit of cash. In 2021, Sherwin-Williams reported annual revenue of $19.94 billion. Of this revenue, it reported a $1.86 billion in profit. On top of that, Sherwin Williams is well-known for the quality of its products. This is what keeps customers coming back.

It’s also worth noting that Sherwin-William’s business is incredibly diversified. In the America’s, its 2020 sales were split very evenly among six different customer demographics. These customers included:

• New residential properties
• New commercial properties
• DIY
• Residential repaint
• Property maintenance
• Protective & Marina

In other words, Sherwin-Williams makes products for pretty much anyone trying to get a paint job done. Speaking of getting things done, that brings us to our last homebuilding stock.

Best All-Around Homebuilding Stocks

No. 2 Home Depot Inc (NYSE: HD)

Home Depot Inc is probably the company that comes to mind first when you think of homebuilding stocks. The Home Depot is the nation’s largest chain of DIY construction stores with over 2,300 locations. The first thing to note about Home Depot is that its sales were inversely impacted by COVID-19.

While most businesses were suffering, Home Depot actually saw a spike in sales. This is likely because people were forced to quarantine for months on end. If you are going to be stuck at home for months, you might as well spend some time fixing up your home. Queue the trip to Home Depot to get some supplies. This surge in quarantine projects boosted Home Depot’s revenue over the past two years.

In FY 2021, Home Depot reported total revenue of $132 billion and a net income of $12.87 billion. These numbers were up 20% and 14.5% respectively year-over-year. For FY 2022, Home Depot reported total revenue of $151.56 billion and a net income of $16.43 billion. These numbers were up 14% and 27% respectively year-over-year. Not bad growth at all for a company that’s been operating since 1978.

Another reason that investors love this homebuilding stock is its dividend. It pays an attractive dividend yield of 2.55%.