The focus: benefit in the focus: benefit deskgroup and green brick partners from lack of housing? (Photo: Freepik, Eyeem)
Household shares are an attractive investment in the long term because they benefit from a continuing demand for living space. There is a lack of living space in the United States and the population grows. Many building stocks are currently correcting. Is there an attractive chance of starting?
Pultgroup: strong profit growth
The third largest house builder in the USA is the Deskgroupspecialize in various market segments: first buyers, real estate changers, luxury buyers and seniors in old residential complexes. They pursue the common approach of a “just-in-time” country strategy, in which an essential part of the country is checked via option contracts. These contracts give the option to only buy developed buildings if the houses have already been pre -sold. In this way, capital binding remains low and flexibility is high.
Pultegroup is characterized by geographical width, which ensures more stability in economically cyclical times. The company is not only represented in the southeast and in the Sunbelt region, but also in the west, in the middle west and in the northeast of the United States.
The new expansion areas include Utah, Idaho and Tennessee, in which more affordable living opportunities are available. Due to its wide range of markets across various segments and regions, Pultegroup can react flexibly to economic developments and benefit in the long term. The market leader in the USA, Dr Horton,, on the other hand, focuses exclusively on the affordable mass market.
With a Course-profit ratio (KGV) of only 9 and one Capital yield (Roic) of 25.6 percent, deskentgroup stands out from the market leader in the evaluation. In the past 10 years, profit growth has been an average of 27 percent with impressive ones. However, risks arise from the current interest rate environment and regulatory challenges. Rising mortgage interests could dampen the demand, while stricter legal regulations could burden the margins and profits of Pultegroup.
Green Brick Partners: Buy large land areas
Green Brick Partners was founded around 10 years ago by James R. Brickman (CEO), Trevor Brickman (division manager) and well -known investor David Einhorn. Since then, the company has developed into one of the fastest growing house builders. While $ 290 million in sales in 2015, this value rose to an impressive $ 2 billion.
Green Brick Partners’ business model differs significantly from many competitors. While many housing companies are pursuing a “just-in-time” land strategy-that is, to buy land only if necessary-Green Brick pursues a long-term strategy. The company buys large land areas, develops them and later sells them with higher margins.
This strategy provides Green Brick Partners more control over the entire development process and reduces the dependence on land banks, which often require high financing fees. At the same time, the company benefits from lower land costs because it acquires the country directly and does not have to buy at the market price. One disadvantage of this strategy is the lower asset turno, since land is often held over a longer period of time, which leads to higher capital binding and limits the free cash flow.
Green Brick Partners focuses primarily on the construction and sale of single-family houses and town houses in growing suburban areas of the USA, especially in the Sunbelt states Texas, Georgia and Florida. These regions benefit from a strong immigration current, which further favors the growth potential for Green Brick Partners.
David Einhorn has taken the strategic leadership in recent years, and with his investment company Greenlight Capital he holds around a quarter of the outstanding stocks. Unicorn and the management team have set themselves the goal of developing Green Brick Partners into the leading company in the US real estate industry. With a combination of discipline, clever acquisitions and a proven, margin strategy, the company seems on the right track.
After the recent drop in the price of around 30 percent, Green Brick Partners with a KGV of only 7.6 and double-digit sales and profit growth are an attractive opportunity for long-term investors. The company is financially established, with a ROIC of 22.9 percent and low net debt of only 0.51 from EBITDA.
Disclaimer:
No investment advice. No call to buy or sell securities.