Low interest rates coupled with tight labor markets and higher consumer confidence have been bullish for homebuilders and housing-related stocks.
XMattress stocks Tempur Sealy (TPX) and Sleep Number (SNBR), along with generator company Generac (GNRC) and insulation provider TopBuild (BLD) are all top stocks in or near buy zones. Tempur Sealy stock, Sleep Number stock and TopBuild stock are in buy zones. Generac stock is near a possible buying opportunity.
Another way to play the housing sector is via an ETF. Among them: ETFs Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL) and iShares Dow Jones U.S. Home Construction ETF (ITB).
Home Stocks With Strong Ratings
These home goods and homebuilder stocks and ETFs have high IBD Composite Ratings. The rating compiles scores on key fundamental and technical metrics like earnings and sales growth, profit margins, return on equity and relative price performance.
Investors should be focusing on stocks with high Composite Ratings, ideally a 90 or higher, which all these stocks have. Tempur Sealy stock and Generac stock have a 92 rating, Sleep Number stock boasts a 98 Composite Rating, with TopBuild stock at a 97.
But stocks are more than their Composite Rating. Investors need to look at other factors in determining what stocks to buy or keep on a watch list.
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Tempur Sealy Stock
Tempur Sealy stock jumped above an alternative buy point of 89.86 on Jan. 28. The next day, shares cleared a conventional buy point of 92.43 from a 13-week flat base. Tempur Sealy stock on Friday fell 2.3% to 90.49, back below the conventional entry but above the alternate buy point.
Despite Tempur Sealy stock hitting record highs last week, the relative strength line never reached its Oct. 31 peak. But the RS line for Tempur Sealy stock rose strongly for most of 2019, reflecting the outperformance vs. the S&P 500 index.
Tempur Sealy stock boasts six straight quarters of slowly accelerating sales growth. Tempur Sealy earnings for Q4 are on tap Feb. 13. Analysts expect Tempur Sealy earnings per share to jump 32% to $1.19 a share. Sales should climb nearly 15% to $775 million, which would be yet another quarter of rising sales growth.
Investors should be very cautious buying stocks just before earnings, unless adopting IBD's earnings options strategy.
Wall Street predicts Tempur Sealy's earnings growth will accelerate to 48% in 2020.
The maker of foam mattresses, pillows and lumbar cushions is the top-ranked stock in IBD's Household/Office Furniture group.
Sleep Number Stock
A Tempur Sealy rival, Sleep Number stock leads IBD's Retail-Home Furnishings Group.
Sleep Number stock fell 3.1% to 53.25 on Friday. But it's still above a 52.25 buy point from a third-stage flat base. Going back to late 2018, Sleep Number stock has had a series of breakouts that soon fail, making it hard to trade even as shares ultimately move higher.
Sleep Number earnings for the fourth quarter are due Feb. 19. Analysts expect Sleep Number earnings to fall 7% to 75 cents per share but sales are seen rising 3.6% to $426.7 million.
Generac Stock
Generac makes power generators for the residential, oil and gas, and industrial industries. It's No. 3 in IBD's Electrical-Power/Equipment group.
Since hitting a record 110 on Jan. 30, Generac stock has been trending lower, closing Friday at 101.35. That's just below its 50-day and 10-week lows. A strong rebound from these levels would offer a buying opportunity. But a weekly close of at least 2% below the 10-week line would be a sell signal for Generac stock.
Keep in mind that Generac earnings are due Thursday. Analysts expect Generac earnings to fall 4.5% to $1.36 but revenue is seen climbing 4.5% to $588.74 million.
As with Tempur Sealy stock, investors should be cautious about buying Generac close to earnings results.
TopBuild Stock
TopBuild distributes and installs insulation. While not exciting at first glance, earnings growth has been robust. TopBuild stock has surged 181% since Dec. 26, 2018.
TopBuild stock is trading in range from a 113.84 buy point from a shallow cup base, closing Friday at 115.90. So far in 2020, it's up nearly 9% after a strong run in 2019.
The RS line for TopBuild stock recently matched its all-time high.
TopBuild stock is this week's New America profile.
Housing ETFs
Direxion Daily Homebuilders & Supplies Bull 3X Shares and iShares Dow Jones US Home Construction ETF are housing exchange traded funds investors should consider for their watch lists.
Both ETFs provide investors with exposure to top homebuilders, giving investors the advantage of a strong sector while diversifying specific company risks. ITB was a recent IBD Stock Of The Day. NAIL is three-times leveraged, so expect big daily moves. NAIL is on IBD SwingTrader.
Follow Gillian Rich on Twitter @IBD_GRich for investing news and more.
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The post Tempur Sealy, TopBuild, Generac, Sleep Number Are Top Housing Stocks Near Buy Points appeared first on Investor's Business Daily.
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