The biggest and best investments are often in companies leading the way in megatrends, future-altering ideas, and cutting-edge innovation.
Next-generation ideas can produce generational profits.
You might be thinking artificial intelligence, computer networking, and robotic medicine. All true.
But there’s another massive trend I want to look at today. One that goes back more than 100,000 years.
That’s when the first homes were built.
Shelter and food were the basics of early life, and they are still the most basic of needs. They are survival instincts written into our DNA (which we now know how to map). Even before civilization, some of our earliest hominid ancestors eschewed nomadic life and settled in encampments.
We all crave the stability and security of a homebase – a place for generations long past to hang their loincloths, more recent generations to hang their hats, and nowadays a place we can eat and sleep in comfort, connect anywhere in the world instantly, and even automate.
The United States in particular took home ownership to new levels. In this age of disagreement and division, almost all of us desire our own house.
In a recently released survey from Bankrate, 78% of Americans view home ownership as a key component of the American Dream.
That’s not shocking, but I was a little surprised that it rated ahead of being able to retire, having a successful career, owning a vehicle… even having kids. (As a proud father of three, I definitely disagree with that last one.)
Homes are more than just where the heart is, as Pliny the Elder said way back in the first century AD. They are usually good investments as well. Not as powerful as stocks in the long run – especially the highest-quality stocks we focus on – but living in your home and having it grow more valuable is about as win-win as you can get.
What started as a survival instinct to provide shelter has become a cornerstone for financial security. For most, it represents a substantial chunk of their nest egg.
In the best of times and worst of times, people want a home. No matter how tough the economy or stock market are, the desire never really dies. I believe it never will – at least not in our lifetimes.
Data going back to 1965 shows that the homeownership rate in the United States has been pretty steady, staying between roughly 63% and 69%.
Meanwhile, home values have skyrocketed more than 2,000% – from an average price of $20,200 in 1960 to $417,700 today.
That’s even more astounding given the unprecedented rise in interest rates. In 2021 and early 2022, before the Federal Reserve began increasing rates to fight inflation, 30-year mortgages averaged around 3%. By late 2023, they were nearly 8%.
Also driving prices up: the supply of homes isn’t keeping up with population growth. The number of people in the U.S. has doubled in the last 50 years, and 330 million people now need places to live. The National Association of Home Builders reports a shortage of 1.5 million housing units in the U.S. as both the population and rates of ownership increase.
But here’s where an opportunity arises.
A New Opportunity in an Old Trend
It sounds counterintuitive, but higher rates are a business opportunity for homebuilders. Earlier this month, the Federal Reserve kept rates at 23-year highs, where they have been since July, and it looks as if they will remain elevated for a while.
The biggest and best homebuilders are thriving because they can offer new buyers lower rates and because so few existing homes are for sale. And beyond that, housing supply remains insufficient for demand. That will still be the case even when rates start to fall.
That’s why I just recommended one of the top-rated homebuilders in my system to my TradeSmith Investment Report subscribers.
This is actually our second homebuilder stock. Last summer, D.R. Horton (DHI) – the nation’s largest homebuilder – popped up in my system as one of the best stocks to buy. We added it last June 1, and we’re now up almost 35% (including dividends).
Source: TradeSmith Finance and MAPsignals.com
With a current Quantum Score of 62.1, DHI is a little below our target buy zone of 70 to 85. Still, the fundamentals remain strong, as do the broader trends. DHI is above my recommended buy limit, but we’re holding for additional upside.
The homebuilder stock we just added has a powerful Quantum Score right around our optimal buy zone. It has exactly what I look for to give us a high probability of making money: strong fundamentals and a healthy business, superior technicals, and Big Money inflows.
Speaking of Big Money, it has poured into this stock over the past 12 months. In the chart below, you see all of the Big Money signals over the past 12 months: 19 buy signals (green) – including one just last week – to just four sell signals (red), which came when everything else was selling off last fall.
Source: MAPsignals.com
These are some of the reasons I like this stock and recommended it to my TradeSmith Investment Report subscribers. It remains below my recommended buy limit, so it’s not too late for you to get in on this great investment, too. Click here to learn how you can join and receive immediate access to this new recommendation.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. Here’s a friendly reminder that markets are closed next Monday for the Memorial Day holiday as we remember all those who have given their lives in service to our country. Our TradeSmith offices will be closed as well.
