Chantico Global chief executive Gina Sanchez recommends buying homebuilder stocks now that the US Federal Reserve has lowered interest rates by 50-basis points.
Last night, members of the FOMC also signaled another 50 bps of rate cuts by the end of 2024.
Rate cuts are typically a boon for housing stocks as they lower mortgage rates, which makes home-buying more affordable for consumers.
Increased demand then translates to higher prices and eventually a better profit margin for the homebuilders.
A name that particularly pops out to Gina Sanchez as worth owning within this space is DR Horton Inc (NYSE: DHI)
A Harris victory could be a tailwind for DR Horton’s stock
Sanchez is bullish on DR Horton also because the recent survey suggests Kamala Harris will beat Donald Trump to become the next President of the United States in November.
A Harris administration will likely focus on affordable housing and, therefore, could greatly benefit the likes of “DHI”, she told CNBC in an interview on Thursday.
The Chantico Global boss is constructive even though the homebuilder lowered its revenue guidance for the full year to $36.1 billion which missed analysts’ estimates in July.
While Wall Street does currently rate DR Horton stock at “overweight”, the average price target of analysts sits at about $197, which roughly matches the price at which the company’s shares are trading at writing.
Nonetheless, DHI pays a dividend yield of 0.61% which makes it fairly positioned for solid total returns moving forward.
Home Depot stock could also benefit from lower rates
Other than homebuilders, Gina Sanchez expects home improvement retailers to do well in a rate-cut environment as well.
“The first thing you do when you buy an old house is you go and fix it up,” she said as she discussed her positive view on Home Depot Inc (NYSE: HD) with CNBC today.
Sanchez recommends buying HD shares for a healthy 2.32% dividend yield as well.
The multinational based out of Atlanta, Georgia recently warned of some weakness as consumers grow more cautious – but its warning has failed to make Sanchez any less bullish on its share price, perhaps because the home improvement retailer handily topped expectations in its latest reported quarter.
Last month, D.A. Davidson analyst Michael Baker also reiterated his “buy” rating on Home Depot stock with an upside to $395 as the company has a history of outperforming in an easing environment.
Baker recommends investing in HD at the time also because he’s convinced that it will continue to expand its market share moving forward.
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