November's disappointing new home sales data didn't necessarily cause pessimism on home builder stocks, because the previous months' numbers had been skewed by government stimulus.
David Urani of Wall Street Strategies and Steve Kim of Alpine Mutual Funds are still bullish on the sector, and think it's a good place to invest in 2010. (See their individual stock picks below)
"I think that you should remember that there was some pulling forward of demand due to the housing stimulus package," Kim said. "You couldn't sell a new home and have it built in time to close in time for the credit."
Instead of looking at sales data, Kim said investors should note that housing has come off a bottom, and that orders per subdivision are starting to improve. That, in turn, will lead to the hope that profitability can return sooner than expected in 2010, he said.
Urani said improvement in the sector should occur in the second half of the year, as the White House programs that are delaying foreclosures will make the first half of the year tough.
Longer-term, however, home builder stocks will spell trouble, Kim said.
"I would utilize...the concerns about foreclosure and the ineffectiveness of the HAMP (Home Affordability Modification Program) as opportunities to buy this group for trades," he said.
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Disclosure information was not available for Urani, Kim or their companies.