Last September, Money & Markets’ Chief Research Analyst Matt Clark wrote about an appealing homebuilder stock with Green Zone Power Ratings of 98 out of 100 and the potential for serious gains…
Based in Arlington, Texas, Forestar Group Inc. (NYSE: FOR) is a $1.4 billion company that develops and sells single-family lots to homebuilders.
As of June 30, Forestar was developing communities in 52 markets across 20 states — including Texas, Florida, South Carolina, Georgia, North Carolina and Tennessee (states with some of the largest population growth).
Matt pointed out that despite high mortgage rates, the supply of available homes was still limited. So homebuyers were turning to new home construction to build their dream home instead.
As usual, Matt’s analysis and timing were both spot-on…
Mortgage interest rates have now fallen for 10 consecutive weeks.
And homebuilder stocks closed out substantial gains across the board in 2023:
FOR’s performance puts it right in the middle of the pack, with a 115% return over the last year and a 21% gain since Matt mentioned it in Stock Power Daily last September.
What’s even better is that after those fast-moving gains, FOR’s Green Zone Power Ratings have improved. It’s now sitting at a truly impressive 99 out of 100:
FOR’s Green Zone Power Ratings in January 2024.
My system says FOR’s shares still have plenty of room to run from here.
But we should also “zoom out” a bit and focus on what could become one of the biggest investing trends of 2024…
The American Dream Bounces Back
Homeownership has always been an integral part of the American dream…
But the U.S. housing market simply hasn’t been the same since the financial crisis and crash of 2008 to 2009.
During that boom, homebuilders worked themselves up to a fever pitch — with housing inventory reaching unprecedented new highs. The subsequent backlash bankrupted many smaller builders, and it’s taken the industry years to recover.
In the meantime, Americans struggled through a great recession … a global pandemic … and not one but two major banking crises.
Homeowners spent more than a decade working through one major financial hardship after another, all while waiting for home prices to rise enough that they could break even on a sale.
That meant that homeowners weren’t selling their homes, and homebuilders weren’t rushing to add more to the supply.
As a result, inventories sank year after year, reaching new low after new low:
As interest rates spiked in early 2022, the industry came to a virtual standstill.
Mortgage rates reached the highest levels in 20 years, and both buyers and sellers put their plans on hold.
Now the Federal Reserve is easing off — and opening the floodgates for new homebuyers.
The Mortgage Bankers Association expects total origination (aka the amount of new money committed to mortgage loans) to reach $1.94 trillion in 2024, up roughly $300 billion (with a “b”) from last year.
There’s simply no way the industry’s paltry supply of housing inventory can keep up with such a massive surge in demand.
That’s where homebuilders like FOR come in…
Artificial Intelligence Confirms the Trend
As you may already know, I launched a new investing service called Infinite Momentum Alert last September.
It combines my Green Zone Power Ratings with artificial intelligence, using AI-powered screening to identify the top 10 momentum stocks out of over 8,000 listed securities.
I designed the system to refresh once a month, rotating stocks the same way you’d pass the baton to a fresh runner in a relay race.
Infinite Momentum Alert is unique because it’s almost completely automated and analytical. I designed the system, but there’s very little discretion involved — the AI basically works on its own!
And since I never taught it how to read The Wall Street Journal or watch CNBC, it’s not influenced by the same financial media as us human investors.
As a result, it makes some bold investing decisions…
For example, the Infinite Momentum system has been uniquely fixated on homebuilders over the last few months.
There’s no bias involved, and the system is only targeting the best momentum investments for any given month. Yet it’s selected no fewer than five different homebuilders, with rapid returns of up to 25% in just two months.
This could be a coincidence.
But it’s also possible that Infinite Momentum Alert is doing exactly what it was designed to do — identifying one of 2024’s biggest trends months ahead of anyone else…
(For more on Infinite Momentum Alert, including how you can get access before the next portfolio “Refresh Day” on Friday, January 12, check out my full presentation HERE.)
To good profits,
Adam O’Dell
Chief Investment Strategist