(MHO): Stock to Buy Now as Fed Lowers Rates

Housing stocks are very sensitive to interest rates as you might imagine. So, it makes a lot of sense to add a home builder like M/I Homes (MHO) to your portfolio as rates are set to head lower in the months ahead. 

Yes, it is true that rates took a bit of an odd detour after the Fed made their first rate cut in October. Gladly after a trip up towards 4.5% for the 10 year Treasury they are now back down to 4.15% with most arrows pointing lower in the year ahead as inflation continues to ebb lower making it easier for the Fed to cut rates as well. 

The best way to view the attractiveness of MHO is through the filter of the Zen Ratings 115 factor review of the stock. 

Indeed MHO is an A rated Strong Buy stock according to the Zen Ratings model. Historically that has pointed to beating the S&P 500 by more than 3 to 1. 

Where MHO really shines is in the 3 component grades that have the most benefit for future stock outperformance:

B for Financials means that this is a well run operation scoring high marks in the 26 factors of financial strength. This includes concepts like ROE, ROA, Debt, R&D spending that prove that management has turned MHO into a well oiled machine. 

All in all we find MHO in the top 15% of all companies in terms of financial strength which bodes well for future earnings beats.

B for AI factors is a bit of an understatement as it actually scores in the top 6% of all stocks in this vital area. Remember that our AI grade looks at many different factors that lead to outperformance. So it’s nice to see how well MHO scores in this key area that points to likely share price appreciation. 

B for Value makes a lot of sense when you appreciate that shares are actually 10% off their highs thanks to the unwelcome rise in rates the past few months. This pushed many investors to the sidelines creating a ripe opportunity in MHO shares as rates are beginning to fall again…and should continue to fall into 2025. 

Buck Horne of Raymond James (top 12% of all analysts) has most certainly taken notice. He sees MHO fair value as $210 based on the current earnings outlook. However, that would only be 10X next year’s earnings when the average stock on the S&P 500 is trading at 23X earnings. 

Granted home builders typically have lower than normal PE’s given their rate sensitivity. But as we swing into a lower rate environment…then the PE should rise. Thus, I could easily see shares trading for $250+ in 2025 and perhaps doubling as early as 2026. 

That means that now is a great time to build a position in this attractive home builder. 

What To Do Next?

M/I Homes (MHO) is just one of the stellar stocks found in my Zen Investor portfolio.

Each pick goes through our rigorous 4 step screening process to find more 100%+ stock winners. 

To get your hands on all my current recommendations…then all you need to do is click the link below. 

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Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)

Editor of the Zen Investor

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