I love it when the mainstream media narrative says one thing… The smart money on Wall Street starts doing the opposite… And my Quantum Edge system picks up on it early — BEFORE the rest of the world catches on.
That’s the surprising opportunity we have now with none other than…
Told you it was surprising.
Mortgage rates are higher than they have been in 15 years, so headlines about housing remain dire. News outlets like Business Insider and Newsweek are still harping on a housing crash. Bloomberg just declared “The U.S. Housing Market is Still Broken” on Thursday.
Yet, when my system generated its list of Top 20 stocks — which my institutional and hedge-fund clients pay big money for — I found that homebuilder stocks are absolutely crushing it.
Homebuilders, believe it or not, are a dominant theme on my Quantum Edge Top 20 stocks.
That may be a little hard to believe, so here’s the data that proves it: Out of the 26 homebuilders in my stock system, the average Fundamental Score is 64.
That’s quite good, though admittedly not spectacular. But the average Technical Score of these homebuilders is outstanding, at 77.
And that’s the score that factors in Big Money buying.
That Big Money could be hedge funds, pension funds, wealth managers, and anyone else responsible for managing sometimes billions of dollars. We don’t need to know who it is specifically. We just need to know these are pros who bring big dollars into the mix.
And here’s the most important proof of all. Homebuilder stocks are rising…
So, from what I see happening in the homebuilders now, it’s time to set aside the narrative that “The Housing Market is Broken.” Big money doesn’t seem to buy that story.
And with institutions responsible for anywhere from 70%–90% of daily volume, we shouldn’t buy it, either. We also shouldn’t overlook that much of the market and those huge money inflows, which is one of the keys in my Quantum Edge System.
And right now, homebuilders average 71 for their overall Quantum Score. That’s right within the buy range I target when I recommend stocks. Mind you, that’s an average of 26 different stocks, from all corners of the housing market…
So, there are some very attractive scores in that group. Sixteen stocks among the homebuilders have Technical Scores above 70, even into the 90s, with Fundamental Scores anywhere from 66 to 83.
What’s Going On Here?
Despite what you hear and read, if the Federal Reserve is done raising rates — which they basically said they are — that opens the door for the smart money to make a contrarian play. In fact, investors are now even pricing in the possibility of rate cuts this year.
Big Money recognized this before the rest of the market.
So, even though it costs more to get a mortgage now than it did just 18 months ago… That doesn’t mean that it’s going to cost more in 18 months, or 12 months, or six months. If we get rate cuts, it may well cost less.
It makes perfect sense that “smart money” is investing in homebuilders.
Especially when these firms have armies of analysts picking up on subtler signals… Like the fact that the Home Purchase Sentiment Index from Fannie Mae just made its best monthly gain since 2021: up 5.5% in April, to 66.8% positive consumer sentiment on housing.
Strength in homebuilders also flies in the face of the regional banking crisis and the credit crunch that everyone’s also talking about. That tells us Big Money isn’t only marginally concerned — if at all — about a full-blown crisis.
And even if you want to argue that institutions are buying homebuilder stocks to cover short positions, that still tells us the bears are losing their conviction. It removes much of the downward pressure they could create. And that interests me in picking stocks.
Ignore the headlines. The real story — the data analysis — is becoming a compelling opportunity.
What Should You Do About It As An Investor?
I was also a bit surprised to see homebuilder stocks start lighting up my Quantum Edge screen. But that’s the whole point of the system — to see what’s really going on beneath the surface. And it makes sense for all the reasons I’ve outlined here today.
I’m evaluating homebuilder stocks closely for a new trade in my services like Quantum Edge Trader. The opportunity is there, so I am sorting through the data, layering on qualitative factors, and comparing them with other opportunities in front of us.
I need to warn you, though, not to go out and buy just any old stock in a sector just because that sector is strong.
For example, I need to caution you against certain homebuilders like Hovnanian (HOV). That’s actually a perfect example of a stock with beautiful technicals — just like many other homebuilders — but which falls down (hard) on the fundamentals. Its Fundamental Score is way too low, at 33.3.
Bottom line, though: Definitely put homebuilder stocks on your radar, if you haven’t already. And if you have, consider yourself ahead of the game.
Editor, Jason Bodner’s Power Trends
P.S. I’ll keep you posted here in Power Trends on the opportunities I see out there. And when the time comes to make an investing decision, I always let my Quantum Edge system guide me to the top candidate.
The first seven stocks I’ve recommended in my new Quantum Edge Trader service all rate highly and have Big Money flowing in.
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