Give These 5 Sectors a Second Chance

Sector #2: Homebuilders

Talk about not feeling the love — the homebuilding sector has been pegged as the root of all evil.

Shares in the group have fallen significantly since peaking in mid-2005. It’s been a long time in the doghouse for these stocks, so is it finally time to bring them back into our good graces? I think so.

For years now, stocks in the sector have written down assets and retooled business to accurately reflect demand. In fact, one might argue that demand is artificially low given the huge amounts of inventory created by home foreclosures and the fact that the government is doing everything in its power to resolve the credit crisis.

It may take some time, but builders are poised for a recovery.

Most stocks in the group are trading for well below book value. Even though it is hard to imagine homebuilders making money for investors today, investing a little love might go a long way to realizing gains in your portfolio down the road.

A few names to consider include Toll Brothers (TOL), D.R. Horton (DHI) and Hovnanian Enterprises (HOV).

Next: Sector #3 – Shippers