Steve’s note to True Wealth subscribers: Just to clarify last Friday’s DailyWealth, we are not selling any of our True Wealth holdings except our speculative position in UAPIX (which made us over 30% since we bought in July). I don’t think stocks in general will do much for the rest of the year, however it’s not worth selling “core” holdings.

The Bull Run in Homebuilders is Underway
by Dr. Steve Sjuggerud
December 04, 2006

It's not easy being the only guy buying homebuilders...

Two months ago, we had our Alliance Conference... a conference just for our “lifetime” subscribers. At that conference, I gave my top five investment ideas right now. One of them was homebuilders.

One subscriber with a Southern accent approached me after my speech and said, “Steve, I shoar like yer ideas... but I tell ya right now... I ain't buyin housing stocks.”

It's tough to be a contrarian when even your best subscribers can't pull the trigger on your ideas. Heck, I have to admit, I was apprehensive about recommending homebuilders right up until the moment I hit “send” on my issue.

But I know that buying what's HATED, CHEAP, and JUST STARTING an uptrend works. Right now, homebuilders fit the bill perfectly. People just can't stand the idea of owning these stocks. Most of them trade for less than seven time earnings. And now, with homebuilders up strongly in the past few months, I just HAD to recommend them.

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Now don't think I've lost my mind... I'm not predicting a bull market in real estate. There's a distinction to make here. The reason I'm recommending shares of homebuilders isn’t because I expect a housing recovery – this is not a story about rising home prices. It's a story about cheap, hated stocks.

Yes, the news and earnings for the homebuilders is terrible. But on Thursday shares of the entire index of homebuilding stocks rose over 5% (as measured by the Dow Jones Home Construction Index).

Over 5% in one day – for an index!

What that move tells me is that it is “GAME ON” in homebuilding stocks. You need to be in this trade now. That 5% across-the-board move is great confirmation that the bull run is underway.

The fact that homebuilders were up a second day on Friday after such a big move on Thursday and that they soared while the overall markets lost money from Wednesday's to Friday's close is even more bullish.

You haven't missed it... yet. Five percent out of what could turn out to be 200% in a few years is nothing.

Go back to the November 20th DailyWealth issue, Where to Get 200% in Two Years, and you'll read the other reasons to be bullish. When you combine those comments with the positive price action late last week, you can understand today's conclusion:

At DailyWealth, we are maximum bullish on homebuilders right now.

Good investing, Steve