Friday December 30, 2011
by Michael Cintolo, editor Cabot Market Letter
Throughout market history, three-quarters of all big winners have been growth stocks, those with big sales and earnings, huge profit margins and a unique and potentially revolutionary new product and service.
But the other quarter of big winners have been turnaround stories, as earnings rocket higher following a tough year or two or three.
Today, I think homebuilding (and other housing-related) stocks are in the midst of a big turnaround, and
Lennar (
LEN) could ride that wave to big gains in 2012.
The company, of course, has been a terrible performer for five years as the housing bust dragged on.
But, impressively, Lennar has notched five straight profitable quarters despite the horrid conditions, has recently been topping estimates and has cut costs to the bone—analysts see earnings leaping 59% next year.
We're already seeing some pickup in broad industry statistics like housing starts, which are literally coming off 50-year lows.
That's a key point—no one (including me) is calling for a new housing boom, but if activity simply moves up to average levels, it would imply a near-doubling in demand!
With all the weak hands out and major signs of accumulation since the stock's October low, I think Lennar should do very well in the year ahead.
Learn more about this financial newsletter at Michael Cintolo's Cabot Market Letter.
