Key insights
- The author suggests that homebuilder stocks like Lennar (LEN) are attractive due to their low P/E ratios and potential for increased demand and margins as interest rates decline. They highlight the cyclical nature of these stocks, recommending buying when prices are down before interest rates decrease and earnings improve. The long-term demand for housing is also cited as a positive factor.
I wonder if anyone else has thought about homebuilder stocks such as Len. The P/E ratio is around 12 but if interest rates decline over time I think demand will pick up, margins will improve and historically these stocks typically pay dividends while decreasing share count over time. Timing the bottom is hard but I think owning homes will always be a main goal for many generations. Therefore the demand could remain for decades. Furthermore these stocks can be cyclical. So it’s important to buy when the stock price is down before interest rates go down and company earnings rise.