The James Hardie Industries plc (ASX: JHX) share price, Brickworks Limited (ASX: BKW) share price and Boral Limited (ASX: BLD) share price are among the best performing stocks on the ASX today.
Shares in James Hardie jumped 6% in late morning trade to $27.57 while Boral rallied 6.9% to $3.90 and Brickworks added 6.1% to $15.80. In contrast, the S&P/ASX 200 Index (Index:^AXJO) gained 1.3%.
You might be making a connection between these outperformers. All three supply building construction products and they have significant US exposure.
Pending home sales hits record
The big run by these stocks come after US pending home sales surged by a record in May to beat market expectations by a mile.
The National Association of Realtors reported overnight that its index of existing home sales surged 44.3% last month to 99.6, according to Reuters.
That's the biggest monthly improvement since the creation of the index in 2001 and economists polled by Reuters were only forecasting an 18.9% rebound in May.
V-shape recovery potential
The bigger-than-expected increase in signed contracts is exciting investors as it indicates that the US housing market will stage a V-shape recovery.
Pending sales are a lead indicator as they convert into sales after a month or two. The number of home resales in May tumbled to a 9.5-year low.
Further, home loan applications are supporting the V-shape thesis as they are near an 11-year high, while building permits recovered sharply in the same month.
Cracks in the bullish picture
The good news comes as the country records ever higher rates of COVID-19 infections that threatens the reopening in several states.
The rapid spread of the virus that makes the US the epicentre of the coronavirus pandemic is the biggest threat to these three ASX stocks.
Further, the Pending Home Sales Index is still well below its 111.4 level that it hit in February before COVID-19 sharply curtailed economic activity.
ASX stocks to buy for FY21
However, I think the sector can keep outperforming barring a big shutdown in the US economy, which doesn't look likely.
This isn't because there isn't a medical emergency, but because the politics won't allow for it – not when the country remains this divided ahead of the presidential election in November.
James Hardie remains my key pick in the industrials space for management's track record in creating shareholder value.
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