Potential Upside In D.R. Horton

Disclosure: I am long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

D.R. Horton, Inc. (DHI) is one of the leading homebuilders in the United States. Like many residential construction stocks it was hammered during the financial crisis as its revenue plummeted over several years. However, DHI was in decline even before Wall Street banks were going bust. Today, with much of the dust starting to settle, residential construction stocks, including DHI, may offer potential returns. While, as I noted in an earlier article, they may not provide enormous returns that some investors capture by buying during the panic, there is still potential for good returns if the housing market rebounds.

Current price more reflective of 2006 than 2009

DHI most recently closed at $20.72, up 409% from its $4.07 dividend adjusted low in November of 2008. However, in spring of 2009 when SPY dipped to new lows, DHI never traded below $5.90. In contrast, DHI traded above $40 per share for many parts of 2005 requiring another 100% increase from today's price. This most recent closing price of $20.72 is similar to the price in the late and early part of 2007. From a historical perspective, housing stocks were in decline long before mortgage securities were devastating Wall Street. The following graph shows the historical (monthly) price of DHI and SPY normalized to January 1, 2001. READ FULL ARTICLE HERE

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