Strategic trade
Trade view / 24 August 2016 at 13:39 GMT

#SaxoStrats: US housing boom bodes well for builders

Head of Equity Strategy / Saxo Bank

On our daily morning call today we highlighted the impressive US New Home Sales figures for August coming out at 654K beating estimates of 580K and up from 582K in July. The figures were the strongest in nine years and it shows that US households are comfortable with the level in 30-year mortgages around 3.4% 

With the US employment trend now robust despite several setbacks in the global economy we are confident that the US housing boom will continue and not exhaust itself until new home sales have reached their natural rate of around 900-950K, leaving some 45% upside still for this segment. This bodes well for construction companies like Toll Brothers and other housing-related stocks.

Natural plays on the continuation of the US housing boom are Home Depot and Toll Brothers. With Home Depot at very rich valuation levels and an impressive price trend we are implementing our US housing exposure through Toll Brothers. 

Toll Brothers weekly share price the past five years:
Toll Bros
Source: SaxoTraderGO 


Entry: Buy Toll Brothers (TOL:xnys)

Stop: $30

Target: $40

Time horizon: Strategic

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more


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