Core Insights - RH, formerly known as Restoration Hardware, has faced significant fluctuations in its business and stock performance over the years, particularly influenced by macroeconomic factors [1][2]. Company Strategy and Performance - CEO Gary Freeman initially proposed ambitious expansion plans to transform RH into a comprehensive lifestyle brand, including ventures into restaurants, hotels, and real estate developments [2]. - Despite the downturn in the housing market due to the Federal Reserve's rate hikes in 2022, RH continued to expand its core luxury homegoods business, accumulating debt in the process [3]. - The stock price peaked in August 2021 at around $700, driven by investor enthusiasm for the company's growth potential [2]. Economic Environment - A year ago, there was optimism for a recovery in the housing market as the Fed began cutting interest rates, but this was short-lived due to subsequent market reactions and tariff policies from the Trump administration that negatively impacted manufacturing operations in Southeast Asia [4].

Group 1 - Shares of Toll Brothers (TOL) have underperformed over the past year, losing approximately 13% of their value [1] - Expectations for a recovery in the housing market diminished at the beginning of 2025 [1] - The analysis is based on over fifteen years of experience in making contrarian bets and identifying stock-specific turnaround stories [1]

Core Insights - The National Association of Realtors (NAR) predicts a significant rebound in the housing market for 2026, with a forecasted 14% increase in nationwide home sales and a 5% increase in new-home sales [2] - Home prices are expected to rise by 4% due to job growth and supply shortages [2] Group 1: Market Predictions - NAR Chief Economist Lawrence Yun anticipates a measurable increase in sales in 2026, driven by positive market conditions [2] - Early signs of market activity include an increase in mortgage applications and a decrease in mortgage rates [3][4] Group 2: Mortgage Trends - Mortgage applications have remained consistently above last year, indicating a strong desire among consumers to enter the market [4] - The 30-year fixed-rate mortgage rate has decreased from 7% in January to 6.24%, with expectations of averaging around 6% next year, improving affordability [5] Group 3: Market Disparities - The housing market rebound is expected to vary across different segments, with the upper end of the market performing better than the lower end [6] - There is a disparity between buyers with existing home equity and those attempting to enter the market [7]

Core Viewpoint - The article highlights compelling investment opportunities in consumer discretionary stocks, particularly in retail, despite a tech-driven bull market overshadowing them [1] Group 1: Lululemon Athletica - Lululemon Athletica's shares have declined significantly this year due to weakening sales trends, but this does not reflect poorly on the brand itself [3][6] - The stock trades at a forward price-to-earnings multiple of 13, indicating potential value for investors, especially as Lululemon has been growing faster than Nike [3] - Lululemon has a market capitalization of $21 billion, operates 784 stores globally, and has tripled its sales over the last six years [5] - The company has a strong customer base with 30 million members in its program, and international sales, particularly in China, are expected to grow by 20% to 25% next quarter [5][6] Group 2: RH (Restoration Hardware) - RH is positioned to benefit from a potential rebound in the housing market as the Federal Reserve lowers interest rates, making it a strategic investment for 2026 [7] - The company caters to higher-income clients and has expanded into lifestyle branding, including hospitality and luxury services [8] - RH has a market capitalization of $3 billion and reported an 8.4% year-over-year revenue growth in the second quarter, with a 21% increase in demand on a two-year basis [10] - The company has successfully expanded into less populated areas, with a remote gallery in England driving a 76% increase in demand [11] - The stock is trading at a forward P/E of 20 and is down 75% from its previous peak, suggesting it may be undervalued relative to future growth opportunities [12]

Group 1 - The article highlights that investors are closely monitoring Lennar's earnings and commentary for indications of a potential rebound in the housing market [1]

Business Outlook - Persimmon is on track to sell more homes this year [1] - Persimmon expects to sell more homes in 2026 [1] Market Trend - Optimism is building around a UK housing rebound [1]

Uh the home construction ETF, the ITB, hit its best day since April 9th. So joining us now to discuss all of these moves and the sector overall is Stephen Kim from Evercore ISI. Stephen, it's great to have you on.Let's start right there. I mean, we don't usually see these types of moves in home builder stocks. Is it warranted.>> Well, you know, I'll tell you the the builders have a reputation for moving fast and furious and uh you don't get a lot of warning. The the the guys in traffic in these names know t ...