Reported home closing gross margin of 16.5% and adjusted of 19.3% excluding non-recurring chargesSCOTTSDALE, Ariz., Jan. 28, 2026 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE: MTH), the fifth largest public homebuilder in the U.S., today announced fourth quarter and full year results for the periods ended December 31, 2025. Summary Operating Results (unaudited) (Dollars in thousands, except per share amounts) Three Months Ended December 31, Twelve Months Ended December 31, 2025 2024 % Chg<td ...

Market attention is increasingly centered on when the Federal Reserve will begin cutting interest rates and what that shift will mean for equity leadership. After keeping policy restrictive to contain inflation, officials have signaled that easing will eventually come if price pressures continue to cool.For investors, the timing and reason behind the first cut may matter more than the cut itself. Two of the most rate sensitive equity groups are banks and homebuilders. Both have spent the past year adjusting ...

Group 1: ETF Overview - NAIL is an ETF that leverages derivatives and borrowed capital to achieve three times the daily return of the Dow Jones U.S. Select Home Builders Index, with $541 million in assets [1] - The fund's performance is highly sensitive to the housing market, where a 2% gain in homebuilder stocks translates to a 6% gain in NAIL, and vice versa for losses [1] Group 2: Market Performance - The housing sector has shown modest strength, with the underlying index up about 8.7% year-to-date through mid-January 2026, leading to an approximate 26% gain for NAIL holders [2] - Despite this, the sector has been mostly flat over the past year due to affordability challenges and elevated mortgage rates [2] Group 3: Mortgage Rates Impact - The direction of 30-year mortgage rates is a significant macro factor for NAIL, currently above 6%, with only a 42.5% probability of dropping below that threshold by the end of January [3] - Elevated rates limit buyer affordability, impacting homebuilder demand and margins, while a drop in rates could accelerate housing activity and boost homebuilder stocks [3] Group 4: Monitoring Mortgage Rates - Weekly tracking of mortgage rates through Freddie Mac's Primary Mortgage Market Survey is essential, particularly for any sustained moves below 6% that could influence homebuilder sentiment [4] - Federal Reserve policy decisions and inflation data are critical for rate expectations, necessitating close monitoring of monthly Consumer Price Index releases and Fed meeting statements [4] Group 5: Earnings Season Insights - The upcoming earnings calendar for NAIL's largest holdings, including PulteGroup, NVR, Toll Brothers, and Lennar, is crucial, as these companies represent over 18% of the fund's equity exposure [5] - A 5% earnings-driven move in these stocks could result in a 15% swing in NAIL due to its leverage [5] Group 6: Key Earnings Report Factors - Important metrics to watch in earnings reports include order trends, cancellation rates, and gross margin guidance, as homebuilders balance incentivizing buyers with protecting profitability [6] - Signals of stabilizing demand or improving margins could trigger a rally, while rising cancellations or weaker-than-expected guidance could negatively impact performance [6]

Core Insights - The 2025/2026 seasonal trade for homebuilder stocks commenced with the iShares U.S. Home Construction ETF (ITB) in a bear market, indicating trades began at significant discounts [1] Group 1: Market Context - The current market environment reflects a bear market for homebuilder stocks, which may present unique trading opportunities [1] Group 2: Analyst Background - Dr. Duru, who has been blogging about financial markets since 2000, has extensive experience through various market cycles, including the dot-com bubble, financial crisis, and the coronavirus pandemic [1] - The blog "One-Twenty Two" offers alternative narratives and challenges conventional market wisdom, focusing on stocks, options, currencies, and Bitcoin [1] - Dr. Duru holds a B.S. in Mechanical Engineering and a Ph.D. in Engineering-Economic Systems, with a background in operations research, management consulting, and data analytics [1]

Market Overview - The first full trading week of 2026 saw a strong rebound in U.S. stocks, with major indexes closing at or near record highs despite geopolitical tensions and mixed economic signals [2] - Major benchmarks ended the week higher, with the Dow Jones up 2.3% to close at 49,504.07, S&P 500 up 1.6% to 6,966.28, and Nasdaq Composite up 1.9% to 23,671.35 [3] Economic Indicators - A softer-than-expected December jobs report indicated fewer jobs added but a decrease in unemployment to 4.4%, reinforcing expectations for Federal Reserve rate cuts later in the year [4] - Economic data provided a mixed but dovish signal, keeping hopes for rate cuts alive [9] Sector Performance - There was a notable rotation from overextended tech/growth stocks to cyclical and value-oriented sectors, with materials and industrials leading gains [4] - Utilities and housing-related stocks surged, with homebuilders like D.R. Horton, PulteGroup, and Lennar seeing significant increases of 7.8%, 7.3%, and 8.8% respectively, following President Trump's directive on mortgage bond purchases [5] - Energy stocks experienced volatility but ended positively, with oil prices (WTI and Brent) rising over 3% amid supply concerns from Venezuela, Russia, Iraq, and Iran [5] Corporate Developments - Semiconductors showed mixed performance, with Intel surging nearly 11% after positive remarks from President Trump, while some AI-related stocks faced pressure [7] - Home improvement and power/utilities sectors showed strength, with companies like Home Depot and Vistra gaining significantly [10] Geopolitical Context - The geopolitical spotlight on Venezuela initially boosted defense and energy sectors, but markets quickly priced in the event as contained [7] - Ongoing anti-government protests in Iran have led to significant unrest, impacting communications and public services [8]

Group 1 - The article emphasizes that individual investors can achieve market-beating returns by focusing on underpriced mid-, small-, and micro-cap opportunities in sectors they understand [1] - The author aims to identify potential 5–10 baggers at the small- and mid-cap stage through careful fundamental analysis of businesses, financials, and valuations [1] - The focus is on early-commercial-stage life sciences companies, insurers, homebuilders, and select consumer-facing businesses, while avoiding investments that cannot be intelligently analyzed [1]

Core Viewpoint - The State Street SPDR S&P Homebuilders ETF (XHB) is a significant player in the Industrials ETFs category, with a focus on the homebuilding sector and a strategy aimed at matching the performance of the S&P Homebuilders Select Industry Index [1][5]. Fund Overview - Launched on January 31, 2006, XHB has accumulated over $1.65 billion in assets, making it one of the larger ETFs in its category [5]. - The fund is managed by State Street Investment Management and seeks to replicate the performance of the S&P Homebuilders Select Industry Index before fees and expenses [5][6]. Cost Structure - XHB has an annual operating expense ratio of 0.35%, positioning it as one of the least expensive options in the ETF space [7]. - The fund's 12-month trailing dividend yield is 0.77% [7]. Sector Exposure and Holdings - The ETF has a significant allocation in the Consumer Discretionary sector, comprising about 67% of the portfolio, followed by Industrials and Energy [8]. - Champion Homes Inc (SKY) is the largest holding at approximately 4.1% of total assets, with the top 10 holdings accounting for about 36.92% of total assets under management [9]. Performance Metrics - Year-to-date, XHB has increased by roughly 0.34%, with the same percentage gain over the last 12 months as of December 31, 2025 [10]. - The fund has traded between $86.79 and $119.58 in the past 52 weeks, indicating a range of volatility [10]. - XHB has a beta of 1.31 and a standard deviation of 25.22% over the trailing three-year period, categorizing it as a high-risk investment [10]. Alternatives - For investors seeking to outperform the Industrials ETFs segment, alternatives such as the Invesco Building & Construction ETF (PKB) are available, which tracks the Dynamic Building & Construction Intellidex Index and has $285.28 million in assets with an expense ratio of 0.57% [11]. - Traditional market cap weighted ETFs may offer cheaper and lower-risk options for those looking to match the returns of the Industrials ETFs [12].

Core Viewpoint - The homebuilding sector is facing significant challenges, particularly highlighted by LAR's disappointing earnings report, which has led to a notable decline in its stock price [1][4][10]. Company-Specific Summary - LAR's stock fell over 4% following an earnings miss, reflecting broader struggles in the housing market despite a slight decrease in interest rates [4][5]. - The company's profits decreased to $1.93 per share, down from $46 a year earlier, while revenue was reported at $9.4 billion, a decline from $9.9 billion in the same quarter last year [5][6]. - LAR has implemented incentives such as mortgage rate buy-downs, resulting in a 4% increase in home deliveries, but this has also lowered the average sales price of homes to $386,000 from $430,000 [6][7]. - The company has reduced its starts and sales pace as part of a strategy to boost sales amid ongoing affordability concerns and weak consumer confidence [6][7]. - LAR's forecast for quarterly home sales is between 18,000 and 19,000 signed contracts, missing analysts' expectations of over 20,000 [8][9]. - The projected sales price is expected to decrease further to between $365,000 and $375,000, with gross margins estimated at 15% to 16% [8][9]. Industry Overview - The housing market is struggling to regain stability, with many potential buyers retreating and sellers withdrawing homes from the market [9]. - The overall sentiment in the homebuilding sector is negative, with concerns about rising input costs for materials like copper and aluminum potentially impacting profit margins [13].

Investment Recommendations - Installed Building Products is better positioned among homebuilders [1] - Suggests moving away from tech concentration and into RSP over IWM for broadening out trade [1] - Home Depot can be a good way to play the housing market [1] - Boeing as a final trade [2] Market Sentiment - Julie is too chicken for home builders [1] - Some names are unprofitable [1]

Market Outlook - The market is currently in a bullish phase, with a year-end target of 7,000 and a projection of reaching 8,000 to 8,400 by the end of next year [1] - The transition year ahead will see a shift from Fed influence back to Wall Street determining the credit cycle [5] Federal Reserve Policy - The Federal Reserve is expected to lower the Fed funds rate to 2.75%, which is considered the neutral rate, and the current hawkish sentiment is viewed as misguided [2][4] - There is an anticipation of the Fed increasing its balance sheet, with estimates ranging from 25 billion to 40 billion per month, which is not classified as quantitative easing (QE) [6] Investment Opportunities - Interest rate-sensitive sectors such as regional banks and homebuilders are highlighted as potential areas for investment, having already corrected from their exponential moving averages [7] - The AI sector and the "Magnificent Seven" stocks are also seen as promising, but a broader market rally is necessary for sustained growth [13] Bitcoin and MicroStrategy - Bitcoin is viewed as a buying opportunity, especially as it has recently dropped from 457 to 155, with current trading around 180 [9][12] - MicroStrategy is considered a misunderstood stock, with its balance sheet being transparent due to blockchain technology, contrasting with traditional financial institutions [11] Economic and Political Factors - The combination of monetary and fiscal policies, along with potential supply-side policies from political figures, could contribute to a strong market performance next year [14][15] - The midterm election cycle is expected to have a different impact than previously anticipated, with no significant corrections predicted [15]