Barclays on U.S. Building Products & Homebuilding: Initiating Coverage: Bottom Fishing

Barclays on U.S. Building Products & Homebuilding: Initiating Coverage: Bottom Fishing

Analyst, Stephen Kim, said, "We initiate coverage of U.S. Building Products & Homebuilding with a Positive. We forecast a significant improvement in housing activity to prevail over the next few years. With earnings and valuations for both sectors plumbing the depths of their historical ranges, we think it's time to start bottom fishing in the building stocks. Our top picks are Stanley Black & Decker (NYSE: SWK) and Lennar (NYSE: LEN)."

"Our value creation analysis finds that over the past 15 years the builders have
generated an average 15% CAGR in tangible book values (after adjustments). There is a wide disparity between companies, with DR Horton (NYSE: DHI) and LEN performing best."

"Our growth feasibility study reveals that several builders cannot reliably fund 20%+ growth even after demand rebounds. This will make it hard for some builders to grow themselves out of their problems. We are most concerned about KB Home (NYSE: KBH)."

Barclays also initiates coverage on Meritage (NYSE: MTH) with an Equalweight. PT $18.

Initiates coverage on PulteGroup (NYSE: PHM) and Interface (Nasdaq: IFSIA)�with�Overweights. PT $8 and $18 respectively.

Toll Bros. (NYSE: TOL) and Owens Corning�(NYSE: OC) both�started with an Overweight. PT $21 and $37, respectively.

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