4 stocks set to rise with increased residential land sales

More land sales leads to more revenue for building materials and builders

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Though still below the historical average, residential land sales in Sydney made an impressive gain of 33% in 12 months up to June 2013. RP Data and the Housing Industry Association released their June quarter residential land report, showing that land sales nationally increased by 18% in the June quarter. This is further evidence of a recovering housing market, so how do you as an investor take advantage of it?

These 4 land, materials and contruction stocks will all benefit from a housing boom.

Stockland (ASX: SGP) is a land developer so they will be in the first line to see revenue and earnings increases. Recent trends are for smaller lots between 320-450sqm, so it has more product to sell in the same land area. It has had some larger than average write-downs in the past two years which have pulled down earnings per share (EPS), but housing growth can turn those negatives into positives with higher sales volumes.

Building materials producer Brickworks (ASX:BKW) is in the second line of benefiting as they fill the orders from construction companies gearing up to build houses on newly sold land. With building approvals times, the land sales happening now will become new construction later in 2014, so investors have an opportunity to start a position before the earnings possibly go too far up.

CSR (ASX: CSR), well known for its drywall products, will also be selling more materials into this upturn. Last year's earnings after tax took a similar hit from asset write-downs, but the share price has recovered from $1.18 in July 2012 to its current $2.38, so already the price is reflecting the improving market sentiment.

Lastly, the builders complete those houses and sell them off. Companies like AV Jennings (ASX: AVJ) and Devine (ASX: DVN) have rallied in share price as well recently, but they still are coming up from very low bottoms that reflected the depression they were in during the GFC. AV Jennings is about $0.60 a share and a PE of 17, and Devine is at $1.35 and a PE of 22.

The Foolish Takeaway

The ideal time to buy into a company or industry is when it's depressed and you can pick up the good ones at discounts to help your portfolio return when they return to fair value. In this case, the move has already started up, but it could be a number of years before the housing industry hits another peak in this cyclical business.

Look for durable competitive advantage in brand name, product reliability and reputation, as well as examine a company's historical earnings and growth, and pick the most stable and strong of the group.

Think about your own total return and find out about companies with good dividends. Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

·    What retailers need to see for a merry Christmas

·    7% yields on offer from property groups

·    ASX rallies as US makes 'tremendous progress'

 

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »