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Analyst Picks Homebuilders D.R. Horton, Pulte

Stability in the housing market has created some opportunity in homebuilder stocks, Deutsche Bank analyst Nishu Sood said Friday on “Fast Money.”

In the long-term, D.R. Horton retains a strong position.

“D.R. Horton is one of the few builder stocks that’s actually returned to mid-summer levels,” Sood said. “A few operating fundamental came in a little bit below expectations, so the stock’s is taking a little bit of a hit, but it’s still been the best performer.”

The Fort Worth, Texas-based builder this week reported net income of 11 cents a share, missing estimates by 15 cents.

Sood said that builders – such as Toll Brothers and Pulte Group, which fared better this week – are “pricing in a fairly significant degree of pessimism about housing,” which explains D.R. Horton’s stock price.

“D.R. Horton is a good blue-chip way to play this space over a longer period of time.

On a shorter-term basis – you know, for the ‘Fast Money’ crowd – I like Pulte on a near-term basis.”

Sood emphasized that the companies are they’re still pricing in somewhat of a recession and a decline in orders, but that the sector has been exhibiting stability.

“Also, keep in mind we’re heading into the traditional seasonal trade,” he said. “Buy them ahead of the spring selling season and you typically have done well.”

Sood downplayed the effect any possible purchase of mortgage-backed securities by Fannie Mae and Freddy Mac, especially with 30-year mortgages already dipping below 4 percent.

“You already have affordability and historically high levels, so it’s not going to be the big mover,” he said.

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