One of the things about a downturn is that it allows for some interesting investing ideas and opportunities. Right now, as housing stocks drop, it is worth noting that there are some bargains to be had. But, as the Wall Street Journal points out, it is important to be careful regarding which housing stocks you choose:
Generally, investors should be cautious about the real-estate sectors
because they could have further to fall. But discerning and patient
investors might be able to find some gems amid the wreckage.
Of course, you will need to tread carefully. Here are some of the ideas that the Wall Street Journal offers in terms of possible good investing ideas in terms of housing stocks:
- KB Home (KBH), which has good cash flow. The company just sold its stake in a home builder in France, so it has the cash needed to help it through the crushing debt and falling home prices.
- M.D.C. Holdings (MDC), which has little land. This is a good thing, since real estate prices are falling for the first time in more than 50 years.
- Public Storage (PSA), a REIT that is fairly cheap, as REITs go. In my opinion, this is probably one of the better deals. People usually need a place to store their stuff, and this is a company that makes money on people moving. And with the current housing market, there are plenty of people moving (usually out of homes).
- Kimco Realty (KIM) is another REIT with potential. It is quite inexpensive (practically basement), making it a good deal. The company focuses on shopping centers, especially those anchored by grocery stores.
While no investment is always a sure bet, choosing a company with solid fundamentals can help. And there are companies out there with fairly low debt, and even builders that have managed to build cash rather than stockpile land. This is a good thing, since it makes them more likely to overcome the current downtrend in the market.
As always, it is important to remember that when searching for bargain investments, like housing stocks right now, it is vital that you have your investment portfolio set up so that you can afford to wait 2-5 years for the housing market to make a proper recovery.
Disclaimer: I am not an investment professional, merely an interested and enthusiastic amateur. All investment carries risk, so you could fail miserably. Do your own research and/or speak with an investment professional before putting your own money into any investment.