Ryland Group (RYL-N)

(A Top Pick March 30/15. Down 16.4%.) Merged with Standard Pacific to form CalAtlantic Group (CAA-N). Has been a fits and starts recovery for homebuilders. He would buy into this new group. Valuations are quite compelling, but you will have to be patient.

This is up and down. The whole homebuilder area has been a very lumpy recovery. Still in the very early stages. In terms of household formations, we are still severely under the averages, let alone the peak of where we were in the boom times. There is a lot of room ahead and thinks we are in a very early stage for the whole group. This one is merging with Standard Pacific (SPF-N) and he is going to have to look at the combined group to see if he will continue to own it. He wants to be in the strongest in the sector.

Likes the homebuilding space very much. It has been a little slow to get off the launching pad, but thinks it has a long ways to go. Lending standards are very, very tight. These things ebb and flow. Well positioned to do well. Dividend yield of 0.25%.

(A Top Pick Jan 2/14. Down 15.56%.) He was early on this. Homebuilding and how the homebuilders did was very lumpy in 2014. We haven’t seen as much of a release in terms of credit as he thought we would. Homebuilders are still really tied up because it is really tough to qualify for a mortgage. It is still at only 1 million homes being formed in the US. Just to keep up with organic growth of population, we need 1.5 million. He is content to stay here and thinks he will be rewarded.

Had exited this group when things started to fall apart and this is his first foray back into the homebuilders. With the fed announcing that the tapering was to begin, that indicated the economy was stronger and that the central governments are going to want some inflation to inch into the environment, and that will be good for hard assets and for homebuilders.