The CME FedWatch tool indicates that there is currently a 96.4% likelihood that the Federal Reserve will cut the rate by 25 bps in September.
Saqib Iqbal, a financial analyst at Tradequotex.com thinks one particular sector can reap the benefits of the looming Fed cuts; Homebuilding Stocks.
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Lower rates will boost housing demand and benefit homebuilders.
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D.R. Horton (NYSE: DHI) has seen a 229% gain of 34% over the last year.
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Supported by Warren Buffett, Louisiana Pacific Corp (NYSE: LPX) is expected to increase by 10%.
“By lowering borrowing costs, the reduced rates would increase demand for houses and enable home builders to grow their businesses. Now is a great time to pile up on home-building stocks because the interest rate cycle is clearly at its high. D.R. Horton (NYSE: DHI) and Louisiana Pacific Corp (NYSE: LPX) are two stocks that can offer a great opportunity.”
D.R. Horton (NYSE: DHI)
The largest home builder in America is D.R. Horton (NYSE: DHI). As part of its commitment to entry-level housing, DHI continues to build communities that provide affordable housing.
For the next couple of years, DHI will benefit from first-time and budget home buyers. The company posted strong results in the second quarter of its fiscal year.
Despite the high interest rates, the stock has gained by 229% over the previous five years and by 34% over the last twelve months. With interest rates low, the stock can certainly make waves.
Louisiana Pacific Corp (NYSE: LPX)
If you want to invest in something backed by Warren Buffett, then you may prefer Louisiana Pacific Corp (NYSE: LPX). LPX offers common house construction materials.
Louisiana-Pacific reported $1.53 in profits per share for the first quarter. This exceeded the $1.12 per share consensus forecasts. After LPX released its Q1 results, the company’s shares increased by almost 15%.
If we see a September cut, Saqib thinks the price can increase by 10% from here.
