We’re Calling Up a Housing Play From the Bullpen
These factors will determine the duration of the Portfolio’s position the shares.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
| BLDR | Buy | 900 | 66.44 | 900 | 1.0 |
After you receive this alert and when the market opens, we will buy 900 shares of Builders FirstSource (BLDR) at or near $67.50. This is a new position for the Pro Portfolio, and these BLDR shares will account for 1.0% of the Portfolio’s assets.
After watching BLDR shares get cut in half from their early February levels, amid the company slashing its housing start projections for this year, we are calling them up to the Portfolio from the Bullpen. We believe that following the recent march back up in oil prices and mortgage rates, which pummeled BLDR in July and have them back at their May lows, the shares may be bottoming out.
While we are still waiting to see if this latest round of U.S and Iran negotiations leads to a sustained peace agreement that would reduce inflation’s tailwind, we do not want to miss a potential rebound in BLDR. The shares rallied from that May low to $90 as oil prices fell in May and June.
Looking at the chart above, we see resistance near $77 and again near $70 for the shares, and to break those levels, we’d need to see a combination of a sustained decline in oil prices, expectations for Fed rate hikes to fall, a steady pickup in new mortgage originations, and a rebound in housing data. Any two of those, or potentially all three occurring would provide a nice boost to BLDR.
As we navigate developments on those fronts, the data they bring will tell us a few things. That includes whether our BLDR position is a medium-to-longer term one.
For now, we’re being opportunistic, hence we’re not starting BLDR with a One rating but a Two. Given our penchant for investing in pain points, we are more than aware of the estimated housing shortage that, depending on the source, finds the U.S. housing market falling short by somewhere between 3.8 million and 7 million units.
As we see it, the housing market is in a bit of a chicken-and-egg situation between available housing supply and consumer affordability. Consumers can’t buy a house if they can’t afford it, and homebuilders aren’t going to build units if there isn’t a customer base. We’ll be watching these factors to determine the duration of the Portfolio’s position in BLDR.
With all of that in mind, we’ll set an initial price target at $80, and establish a checkpoint level at $60. Should upcoming data point to a sustained rebound in housing and a better housing market in 2027, we’ll revisit our target. Subject to where that potential revision could land, it would determine where we might add more shares to the Portfolio.
Because this removes one company from the Bullpen, in a follow-up alert, we will be doing a bit more work on that area today. That includes removing a few companies and adding some new ones to the Bullpen, perhaps even a fresh ETF.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade’s executed price here. Be sure to toggle the chart to sort by Purchase Date.)
