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16 stocks — from Adobe to Home Depot to Zillow — to help you tap into the housing boom

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The U.S. housing market is a beneficiary of people’s desire to spread out amid the coronavirus.

But even after the pandemic ends, the notion of crowding into business districts for work will be obsolete for many people. There are various ways for investors to try to take advantage of this trend.

One way is by investing in home builders and their suppliers. You can read about those here, with a breakdown of three U.S. home construction and supply ETFs’ holdings.

As a follow-up, here are comments from money managers about how investors might best play the U.S. housing market for the long term.

A return to household formation

Iman Brivanlou is the managing director for high-income equities at TCW Global, an asset manager based in Los Angeles that manages about $225 billion, mainly for institutional clients. He is also the portfolio manger of the TCW Global Real Estate Fund. The fund’s institutional shares
US:TGREX
are rated five stars (the highest) by Morningstar. The fund has only about $9 million in assets but is managed with the same strategy Brivanlou uses to run global real-estate investment portfolios for institutional clients.

During an interview, Brivanou said he expected U.S. household formation among millennials to pick up after it stalled during the years following the 2008 financial crisis.

There was a “lost decade of formation,” he said, as some millennials “preferred to live near where the action was,” he said. But some investors expected household formation to rise as millennials got older and wanted families, bringing about “the age-old desire of a larger home and a nice school district — things you find in the suburbs,” he added.

“Now, accelerated by Covid, we see the latter interpretation vindicated,” Brivanou said.

All of the above, plus incredibly low mortgage interest rates, point to another five to 10 years of strong housing-market growth, he said.

Brivanou wasn’t at liberty to discuss individual stocks, but the top holdings of the TCW Global Real Estate Fund are listed below.

Looking far ahead, he advised investors to think about artificial intelligence and related technological developments, including autonomous vehicles, and how these will affect the real-estate market: “AI [artificial intelligence], right now, is impacting the market at the semiconductor and technology level. But in five to 10 years, there will be real estate winners and losers.”

Housing and related investment plays

Ellen Hazen, a portfolio manager at F.L.Putnam Investment Management Co. in Wellesley, Mass., doesn’t agree with Brivanlou’s thesis about renewed household formation among millennials, because of a “lack of growth in real wages for the lower half of the distribution.” That problem is combined with a mix of newly built homes that leans toward the larger and more expensive, and tight credit standards among mortgage lenders, she said during an interview.

But Hazen listed many companies that should benefit from the strong U.S. housing market, or more broadly, “covid-related plays.” These include software companies that gain not only from the stay-at-home trend, but from the accelerating corporate trend of outsourcing as many core network and other IT functions as possible.

Hazen named Adobe Inc.
US:ADBE,
Amazon.com Inc.
US:AMZN
 and Microsoft Corp.
US:MSFT.
All three have soared this year:


FactSet

When asked about high valuations for these stocks, Hazen said: “Almost nothing in the U.S. equity market is undervalued these days. If you are going to pay up for a stock anyway, you should look where you have the highest secular growth, and that is more in software.” Sales growth rates are included in the stock table below.

Related plays on the higher-use of bandwidth are Crown Castle International Corp.
US:CCI
 and American Tower Corp.
US:AMT,
which own cell towers and lease them to major wireless telecommunication service providers.

Moving closer to housing, Hazen named TJX Cos.
US:TJX,
which runs TJ Maxx and Marshalls stores, but also operates HomeGoods, which follows a similar discounted retail concept as the other two, with new products hitting the shelves every week.

She listed Sherwin-Williams Co.
US:SHW,
which distributes its paint only through its own stores. This “leads to higher structural margins,” Hazen said.

For direct housing plays, in addition to the obvious suppliers (Home Depot Inc.
US:HD
 and Lowe’s Cos.
US:LOW
), she highlighted Mowhawk Industries Inc.
US:MHK,
which makes flooring materials; Beacon Roofing Supply Inc.
US:BECN
; Masco Corp.
US:MAS,
which makes various plumbing and other products used by builders; and Fortune Brands Home & Security Inc.
US:FBHS,
another supplier of various products used in home construction.

Zillow, eXp

Gerald Sparrow manages the Sparrow Growth Fund
US:SGNFX,
which has a five-star rating from Morningstar. He screens for high unit-sales growth when selecting companies for the fund, which held 141 stocks as of Sept. 30.

Sparrow holds shares of online real-estate-database company Zillow Group Inc.
US:Z
and a smaller rival, eXp World Holdings  Inc.
US:EXPI.
Zillow reported a 28% increase in second-quarter revenue from a year earlier, while eXp’s sales were up 33%.

An off-the-beaten path investment

Charles Lemonides of ValueWorks in New York shared a specific way of investing in the residential real-estate market in Hawaii: Maui Land & Pineapple Co.
US:MLP,
which holds nearly 800 lots in Maui that are subdivided and ready to be built on, with permits held by the company.

During an interview, Lemonides said the company had obtained the permits before the housing-market crash that began in 2008, and had sold very little since then. But now, he believes Maui is “right at the cusp” of a long period for very strong housing demand.

“We think they will realize $250,000 to $500,000 per lot in profit, selling to builders,” he said, which would mean “value” of $10 to $20 per share. The shares closed at $10.98 on Oct. 5, and beyond those lots, the company “owns miles of coastline and thousands and thousands of acres in the mountains” that could eventually be subdivided and sold to builders.

As you can see, the stock has been volatile over the past five years:


FactSet

“It had a huge run a few years ago, when we took off some exposure. And we are building exposure again at these prices,” Lemonides said.

Stock metrics

Here are all the individual stocks mentioned by the money managers interviewed for this article, sorted alphabetically. To see all the data, you will need to scroll the table at the bottom:

Company

Ticker

Total return – 2020

Revenue growth – most recent reported quarter from year-earlier

Forward P/E 

Adobe Inc.

US:ADBE
 

48%

14%

45.0

Amazon.com Inc.

US:AMZN
 

73%

40%

89.7

American Tower Corp.

US:AMT
 

7%

1%

50.9

Beacon Roofing Supply Inc.

US:BECN
 

2%

-7%

15.3

Crown Castle International Corp

US:CCI
 

21%

0%

68.6

eXp World Holdings Inc.

US:EXPI
 

347%

33%

108.6

Fortune Brands Home & Security Inc.

US:FBHS
 

37%

-9%

21.9

Home Depot Inc.

US:HD
 

32%

23%

24.3

Lowe’s Cos. Inc.

US:LOW
 

43%

30%

20.6

Masco Corp.

US:MAS
 

18%

-4%

19.6

Maui Land & Pineapple Co. Inc.

US:MLP
 

-2%

-31%

N/A

Microsoft Corp.

US:MSFT
 

34%

13%

32.7

Mohawk Industries Inc.

US:MHK
 

-22%

-21%

13.3

Sherwin-Williams Co.

US:SHW
 

19%

-6%

27.8

TJX Cos.

US:TJX
 

-5%

-32%

28.0

Zillow Group Inc. Class C

US:Z
 

140%

28%

1529.9

Source: FactSet

You can click on the tickers for more about each company, including news coverage, ratings and price targets.

Many of the quarterly revenue figures show severe declines, because of the second-quarter coronavirus lockdown.

The forward price-to-earnings ratios are high for many of these companies, especially when compared with the S&P 500 Index
US:SPX,
which has a forward P/E ratio of 25.5. But investors are placing a premium on growth, and a rapidly expanding company such as Zillow is much more focused on reinvesting into its business than showing a profit. This is a familiar story for investors who rode Amazon.com to such tremendous gains by patiently holding the shares.

Before considering any individual stock for investment, it is important for you to do your own research to form an opinion of how well the company will compete over the next decade.

Jamie Hopkins, director of retirement research at Carson Group, which provides support services to hundreds of investment advisory firms and manages about $13.5 billion for its own clients, brought a note of caution to the discussion: “I would not steer clear entirely, but I would caution people against trying to bet that the last six months’ trend is going to be the next year’s trend.”

In other words, shares of home builders and suppliers won’t shoot up forever.

“The stock market tends to react to information quickly,” anticipating trends and easily overshooting them, he added.

Hopkins expects “some changes to that behavior” in the housing market over the next year, and pointed to another reason for caution and maybe even a change of direction: “A lot depends on timing we cannot control, such as vaccines. So I would ask, what didn’t do well over the last nine months? Some of that may be an opportunity.”

Fund holdings

Here are the top 10 holdings of the TCW Global Real Estate Fund as of Aug. 31:

Company

Ticker

Share of portfolio

Total return – 2020

Industry

CBRE Group Inc. Class A

US:CBRE
 

5.3%

-21%

Real-estate Development

Chatham Lodging Trust

US:CLDT
 

4.5%

-59%

REIT – Hotels

American Tower Corp.

US:AMT
 

4.2%

7%

REIT – Cellular Towers

Front Yard Residential Corp. Class B

US:RESI
 

4.2%

-23%

REIT – Rental Homes

Vonovia SE

DE:VNA
 

4.0%

27%

Real-estate Development

Mid-America Apartment Communities Inc.

US:MAA
 

3.9%

-3%

REIT – Apartment Communities

Summit Industrial Income REIT

CA:SMU
 

3.3%

12%

REIT – Light Industrial

Equinix Inc.

US:EQIX
 

3.3%

37%

REIT – Data Centers

Longfor Group Holdings Ltd.

HK:960
 

3.3%

22%

REIT – Various

Jones Lang LaSalle Inc.

US:JLL
 

3.0%

-42%

Real-estate Development

Extended Stay America Inc.

US:STAY
 

3.0%

-15%

Hotels

Goodman Group

AU:GMG
 

3.0%

39%

REIT – Industrial, Offices

Segro PLC

UK:SGRO
 

2.9%

10%

REIT – Warehouses, Light Industrial

Toll Brothers Inc.

US:TOL 2.8%

26%

Homebuilding

Invitation Homes Inc.

US:INVH
 

2.7%

0.1%

REIT – Single-family Home Leasing

Source: FactSet

Don’t miss:Professional investors have their eye on these eight stocks as the used-car market in the U.S. moves online



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I have a First World problem: I earn $500K, and have $1 million in assets. Should I buy a $30K bracelet during a global pandemic?

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I have a mundane First World problem that may or may not warrant your attention. But I read your column, and thought you could help me. It’s something that has been troubling me for some time. Should I buy a $30,000 piece of jewelry?

I have a $500,000 stable annual income, no debt, my kids have their private college tuition and retirement fully funded, and I have an additional $1 million in investable assets in various bank and brokerage accounts. My husband and I are in our late 40s, early 50s.

We have always lived a financially disciplined lifestyle. We avoid impulse buys, while spending liberally on things we truly enjoy and care about, including annual multi-week vacations for the family, organic food, home upgrades for our hobbies, and supporting our favorite charities.


‘The good news is, this particular brand of jewelry has been holding its value very well over a long horizon.’

I personally adore quality designer jewelry, and get a little thrill every time I look at them on my wrist and finger. I have never spent $30,000 on one piece of jewelry, and I feel some guilt spending that much money on something primarily for myself, not the family.

This particular piece, a bracelet, has been on my radar since 2019, and I found myself coming back to it time and again. I spent hours following online discussion threads, researching its resale value (in case my daughter doesn’t want it) and insurance against loss, etc.

The good news is, this particular brand of jewelry has been holding its value very well over a long horizon; in fact, it boasts the highest resale value in the last couple of years, according to top luxury resale and consignment sites.

However, I just can’t bring myself to pull the trigger: spending almost 3% of our investable assets on a piece of jewelry just feels very excessive to me. I tell myself to reconsider in a few years when we get to a higher net worth to make the purchase easier to justify and stomach.

My husband said I should buy it sooner, and enjoy it for a few more years. I realize the jewelry aspect makes this a highly personal-preference question. I guess a more generic question could be, does a $30,000 discretionary spend sound reasonable in our financial situation?

A Bracelet Lover

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

Dear Bracelet Lover,

Before the world and its mother comes down on you like a ton of bricks for asking this question during a pandemic — and before said world and its mother comes down on me for answering your question — I will say that I find your letter curious. Not “$30,000 bracelet” curious. But curious, nonetheless.

The reason: I don’t believe this magnificent, guilt-ridden obsession is really about the bracelet at all. The object of your desire could be anything: It could be a Tesla Model 3 or a used GT-R. It could be a Fabergé egg, aluminum siding, or even a $30,000 Hermès Kelly clutch bag.

It’s extravagant in the way a motor vehicle or kitchen reno is extravagant. Did you know the average cost of a light vehicle in the United States is over $40,000? You can’t drive a $30,000 bracelet, but you can wear one and drive a $10,000 car to get you from A to B. Who’s more mundane now?


‘The reason: I don’t believe this magnificent, guilt-ridden obsession is really about the bracelet at all. The object of your desire could be anything.’

I get it. There is a thrill in buying something so outrageously out of your price range. How will that make you feel? What kind of connection will you have to this object? Will other people notice it? Will you tell them how much it cost? Would owning it confirm any privately-held ambitions you have for yourself?

You are not just buying a $30,000 bracelet. You are, perhaps, buying your way out of an old way of seeing yourself. That may or may not last. Or maybe you truly believe that it will bring you joy as a family heirloom, and you can resell it at the same or a higher value, if a prospective buyer or the real world come knocking.

Will wearing such an item give you more confidence to sail past the snootiest members of your tennis club or the maître d’ at the most popular Michelin restaurant in town? Please know that I’m not speaking about you here. I’m talking about anyone who splashes out, during a pandemic or not.

About the pandemic. Researching this purchase may lift your spirits, and actually help you escape the mundane. It may or may not be a coincidence that you choose now to do something so bold and new. It’s a $30,000 sop to coronavirus. A million-dollar spit in the ocean during a truly difficult year.


For some people, spending $30,000 on one luxury item is a way of showing their spouse or, indeed, themselves that they are worth that much.

For some people, spending $30,000 on one luxury item is a way of showing their spouse or, indeed, themselves that they are worth that much. The diamond industry, for better or for worse, is based on that conceit. You need a rock on your finger to show the world that it’s true love.

For others, it’s about showing the world that you can’t mess with them and, like Leona Helmsley, the Queen of Mean, will show the world there are no little people, only big handbags — like this woman who sued a country club in New Jersey after a waiter spilled wine on her $30,000 Hermès Kelly clutch bag.

Would I spend $30,000 on a piece of jewelry if I were in your position? Probably not. Should you? That’s not for me to say. That’s for you to find out. The great Suze Orman would probably give you a “yay” or “nay” on the matter, but I’m not Suze Orman. That’s not my gig, nor is it my style.

I’ll tell you what is my style: A pair of chocolate brown Donna Karan trousers that I bought for a friend’s wedding in New York 20 years ago. I had traveled here from Dublin. A friend took me to Saks Fifth Avenue. I was fresh out of college, and thought, “How expensive could they be?”


You have formed an attachment to this bracelet, or at least to the idea of this bracelet. Let that go for a moment. What else you could do with $30,000?

I rolled up to the cash desk after they were adjusted three ways from Sunday, and the clerk told me they were $450. I handed over my fresh-out-college credit card and watched in horror as the cashier rung up the equivalent of one month’s rent. I was Jason, and those threads were my golden fleece.

I loved those dress pants. They moved like slow motion. I cared for them like priceless silk and, one day, I dropped them into a dry cleaners in Dublin. I noticed some lights were out that day, but I paid no heed. It was 2008. The dry cleaners went bankrupt, and padlocked its doors. I never saw those Donna Karan trousers again.

What has all that got to do with your $30,000 bracelet? Three things. 1. This piece of jewelry has something to teach you, and you don’t have to buy it to learn what that is. 2. This is a trouser- and judgment-free zone. 3. Our monetary dilemmas are rarely about what we think they’re about.

You have formed an attachment to this bracelet, or at least to the idea of this bracelet. Let that go for a moment. What else you could do with $30,000? Something different, but equally novel that perhaps could also have an impact? You don’t even have to spend the money on you.

Buy or don’t buy it. Remember this: However it makes you feel, you can feel that way without it. Whatever properties, provenance or millesimal fineness this piece of jewelry holds, your own qualities as a human being outweigh it. Whatever obsession it sparks in you, you can out-spark it.

The Moneyist: Before I give my fiancée a $7,000 diamond engagement ring, I want her to promise to bequeath it to my daughter

Hello there, MarketWatchers. Check out the Moneyist private Facebook
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The Moneyist: ‘The thought of her keeping these ill-gotten funds just chaps my behind’: My granddaughter, 7, lives with me — yet her mother received her stimulus





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My son, 18, says I should hand over the $1,400 adult-dependent stimulus. He claims it belongs to him. Who’s right?

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Dear Quentin,

We’re having a debate in our house regarding the latest stimulus payment. I claim head of household and have two 18-year-old adult dependents that I claim on my taxes. I received a $1,400 stimulus for each of us. My 18-year-old son claims that I must give him this money stating that it is meant to be given to the adult dependent.

I say it’s not meant for him, as I claim him as a dependent on my taxes because I pay more than half of his household expenses (actually all of his expenses) and this money will be used to offset the expense of raising him. If you have any information you can share to shed some light on the debate at hand, I’d much appreciate it.

I keep searching the internet for some proof that I must give him this money but keep coming up empty-handed.

Fingers crossed

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

Dear FC,

If the money was meant for your son’s use, it would have been sent to your son. The clue is in the wire transfer. He is a dependent and, as such, the money is meant to be used for his care. They are emergency funds to be used for food, clothing, utilities, and anything else that adds to the cost of running a household and, yes, stimulating the economy.

Let’s assume your son is correct in his belief that the money is for his use, and could (or should) be used for his own expenditures — from meals out with friends to new sneakers. In that case, he should be of independent means and pay for everything else: rent, food, transportation. I have a feeling that $1,400 would be used up pretty, pretty, pretty fast.

If you have a balance on your credit card for family purchases, what reason would your son have for you not using part of the total economic stimulus payment to pay that balance off? This is an opportunity to lay bare the economics of running a household, so your son can have a bird’s eye view on how to manage a budget, and the costs of each family member.


‘The problem with putting food in the cupboards: Some kids think it appears there magically. And I don’t only mean that the food is conjured up through some act of existential bookkeeping.’


— The Moneyist

The problem with putting food in the cupboards: Some kinds think it appears there magically. And I don’t only mean that the food is conjured up through some act of existential bookkeeping, but that it actually makes its way from the supermarket bags to the cupboards without any human intervention whatsoever. It takes time to earn the money, shop and to put those groceries away.

As an adult dependent over the age of 16, your son did not qualify for the first two stimulus checks. Under President Biden’s $1.9 trillion American Rescue Plan, however, parents may claim their adult children as dependents. The amount is based on your income (payments fall for individuals earning $75,000 a year and up and couples making $160,000 a year or more).

The $1,4000 is not based on your son’s circumstances and, as such, the money should be used at your discretion. If you can afford it, however, I suggest talking through your son’s priorities and working with him on how he could spend all or part of the $1,400. It may be that you can help your son feel empowered to spend it on his own upkeep.

But — and this is a big “but” — if he wants you to buy necessities while he uses the money for his own enjoyment, that’s called “pocket money” not an economic impact payment, and that’s something he is given as a child or needs to earn himself. If you decide upon a potential compromise, the final answer will be determined by your son’s own financial priorities.

The Moneyist: I’m a farmer in my late 30s, live a frugal lifestyle, and my son has a disability. Should I pay extra on my mortgage — or save for retirement?

Hello there, MarketWatchers. Check out the Moneyist private Facebook
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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.





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These money and investing tips can help you decide whether to ‘sell in May and go away’

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Don’t miss these top money and investing features:

Sell in May and go away? Not so fast. These money and investing stories, popular with MarketWatch readers over the past week, can help you position your portfolio as the U.S. stock market enters its typically weaker six-month stretch — although that certainly wasn’t the case in 2020. So while it makes sense to seek out market sectors that are stronger in the summer months, it doesn’t change the fact that time in the market, and not market-timing, has been the most reliable creator of wealth.



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