Page 25 - ARUBA TODAY

BUSINESS Monday 4 deceMber 2017
A25

Of Mutual Interest:

Housing trends favor builders focused on entry-level buyers

By ALEX VEIGA Even so, they are now trad-
AP Business Writer ing close to the top end
It’s lining up to be another of their traditional price-
strong year for investors to-book value, which has
who own homebuilding typically ranged between
stocks. 1 and 2 times.
Shares of the 10 builders For now, Reichardt has
with the most completed “Buy” ratings on only two
sales in 2016 are up an builders, D.R. Horton and
average of 60.8 percent. Lennar.
And exchange-traded Earlier this year, D.R. Hor-
funds, or ETFs, that invest ton acquired land devel-
in homebuilders have also oper Forestar Group in a
notched gains that eclipse deal that helps beef up
the growth in the broader the builder’s access to
U.S. stock market. land that’s been cleared
While many economists ex- for new construction. Last
pect U.S. housing market month, Lennar bought rival
growth trends to continue CalAtlantic Group in a $5.7
next year, homebuilders billion deal, not including
that focus on entry-level $3.6 billion in debt, that will
buyers could be the safest create the nation’s largest
bet for further gains. homebuilder.
“The demand, as we see “Those are two companies
it, is likely to continue to be undergoing transforma-
pretty good, but the build- New home construction is underway in a housing plan in Zelienople, Pa. It’s lining up to be another tions to some degree that
strong year for investors who own homebuilding stocks as a proxy bet on the health of the U.S.
ers that will most benefit will housing market. Housing market trends are expected to remain favorable for builders, but those we think can result in high-
be those who have a focus focusing on first-time buyers could be the safest bet for further gains. er long-term multiples,”
on the low-end homebuy- (AP Photo/Keith Srakocic) Reichardt said.
er,” said BTIG homebuild- “It’s harder to make that
ing analyst Carl Reichardt. The SPDR S&P Homebuild- the next two years.” ally peaked out, you have argument for many of the
A growing economy, solid ers ETF is up 27 percent this Realtor.com’s 2018 U.S. to believe that something other companies in the
job market, low unemploy- year, while the iShares U.S. housing forecast released else has changed, some- group at these valuations
ment rate and low mort- Home Construction ETF is this week calls for U.S. home thing secular, either in how right now.”
gage interest rates have up 54.9 percent. prices to rise 3.2 percent these companies are run or Reichardt has “Neutral”
helped drive demand for Many economists expect in 2018, down from a pro- in what demand for hous- ratings on most of the other
homeownership this year. the economic and housing jected gain of 5.5 percent ing relative to other con- builders he tracks. He also
And a stubbornly thin in- market trends to continue this year, as the inventory sumer goods is going to has a “Sell” rating on KB
ventory of homes for sale next year, including further of homes for sale begins to look like,” Reichardt said. Home.
has kept home prices increases in sales of new rise. The forecast also sees “And I’m not quite ready Another reason Reichardt
headed higher. All that has homes and prices. sales climbing 2.5 percent. to conclude that this time is bullish on D.R. Horton and
been a boon for home- “The market for new homes Still, favorable housing it’s different.” Lennar: Both are catering
builders. Sales of new U.S. is improving steadily,” said market trends may not be Most of the builders that to entry-level buyers, which
homes hit the fastest pace Patrick Newport, executive enough to translate into were in business during the he believes have more po-
in a decade last month. director of U.S. economics more big gains for home- last housing boom have tential to make solid gains
The trends have also driven at IHS Markit. “The prog- builders. yet to see their share prices at this stage in the housing
gains for some ETFs with nosis going forward is for “At these valuations, close return to those high-flying recovery.q
exposure to homebuilders. further steady growth over to where they’ve tradition- levels.
CVS pushes into insurance with $69B Aetna bid

By TOM MURPHY has not been announced a billion prescriptions a up prescriptions.
DAVID KOENIG publicly. That represents year for insurance compa- “If you think about it, we
Associated Press a 29 percent premium to nies, including Aetna. actually don’t have any-
CVS will buy insurance gi- the price of Aetna shares The deal could help feed a thing like that,” Jefferies
ant Aetna in a roughly $69 on Oct. 25, the day before steady stream of custom- analyst Brian Tanquilut said
billion deal that will help The Wall Street Journal first ers to CVS stores, many of recently.
the drugstore chain reach reported about the possi- which now offer a growing CVS Health started add-
deeper into customer bility of a deal. menu of medical services ing clinics to its drugstores
health care and protect The mammoth acquisition in addition to the usual years ago and has been
a key client, a person with pairs a company that runs fare of prescriptions and expanding the services
knowledge of the matter more than 9,700 drugstores cold and cough supplies. they offer. Customers can
said Sunday. CVS Health and 1,100 walk-in clinics That could help fuel a get physicals, flu shots or
Corp. will pay about $207 with an insurer covering push by CVS to become treatments for sinus infec-
in cash and stock for each around 22 million people. more of a one-stop-shop tions at the clinics. They
share of Aetna Inc., ac- CVS Health Corp. is also for health care, a place also can receive choles-
cording to the person, who one of the nation’s biggest where patients can get terol screenings or find
spoke on condition of ano- pharmacy benefit manag- blood drawn, then see a help monitoring chronic
nymity because the deal ers, processing more than nurse practitioner and pick conditions like diabetes.q