CalAtlantic Group Inc. (CAA)

(A Top Pick Dec 19/16. Up 61%.) Homebuilders have done wonderfully in his US small-cap portfolio. This company is in the process of being acquired.

(His theme today is economically sensitive stocks, and ones that have disappointed lately.) This is a homebuilder, a cyclical business. It is an example of one that does not fit the quarterly earnings pattern, because there are a lot of moving parts. Trading at a very reasonable multiple, but the latest quarter was a little disappointing because margins were challenged, as you often see with homebuilders. As margins go like they did last quarter, the price drops, an opportunity for a long-term investor to get involved. Trading at 1X Book and 10X earnings, and grew revenue 13% year-over-year. Dividend yield of 0.5%. (Analysts’ price target is $41.)

A home builder in the US in areas of higher growth. They are a combination of two companies that merged last year. Synergies are very strong. With mortgages becoming more expensive, but house hold formations are still below population growth, so the US needs more houses. Valuations are quite low on this one. The tax benefit, if it comes, will be highly beneficial to home builders as they are one of the highest taxed. (Analysts' Target: $41.38).