Invest in These 2 Homebuilders: Analyst

Pulte posted a bigger quarterly loss than expected Wednesday,related mainly to insurance reserves and charges to write down land. Megan McGrath, homebuilder analyst at Barclays Capital, shared her analysis.

“It was a pretty mixed quarter,” McGrath told CNBC.

Mcgrath noted that Pulte is slightly more expensive than its peers, trading at about 1.6 times tangible book value versus the group average of about 1.3.

“If you own Pulte, don’t panic—nothing in this quarter lets us believe that we’re seeing collapsing or falling off a cliff,” she said. “But if you’re looking for a builder to invest in, we prefer to stay with a company not quite as expensive, but still close to profitability like Pulte."

"So we’re recommending DR Horton and Lennar .”

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Scorecard—What She Said:

• McGrath's Previous Appearance on CNBC (Jul. 27, 2010)

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CNBC Slideshows:

• 10 Cool Home Upgrades

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Where Other Homebuilders Stand:

Toll Brothers

KB Home

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Disclosures:

Mcgrath does not own shares of PHM. However, she has investment banking clients who own shares of PHM. In addition, Barclays and/or an affiliate makes a market in securities of PHM.

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Disclaimer