Stealth housing plays

Keep the derivative stocks in mind, not just obvious ones such as homebuilders.

By Jim Cramer Mar 1, 2013 10:23AM

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The stealth housing plays are all the rage -- the derivative plays -- and they are a natural place to go in the second year of a move.

What do I mean by stealth plays? Take Radian Group (RDN). Here's one I am really pounding the table about because people simply don't realize how much money a mortgage insurer can make when they get it right. It is a very simple business when lending standards are stringent, and it has very little competition except for a not-as-hot lender, the Federal Housing Administration, which is busy cutting back its exposure because of less-than-lofty standard.


You have to focus on Radian because when you see action like we are seeing now, where a company can price a gigantic 34-million-share secondary at $8 and then take off immediately, that's an amazing sign. Keep in mind that when that happens, market players are attuned to the notion that the company's newfound cash comes with the ability to pay down debt, and that is incredibly additive. Remember, Radian's book of business is largely from the post-housing bubble and is much less susceptible to default than you think.


Model houses Thinkstock Images JupiterimagesOr how about Axiall (AXLL), which makes PVC piping used in housing construction? This company, which resulted from the merger of Georgia Gulf and PPG Industries' (PPG) commodity chlor-alkali assets, has run tremendously, so much that when Credit Suisse rolled out coverage of the stock it had to do so as a Neutral because it is already up 35% year to date. Of course, it isn't just the housing angle here, as Axiall's products are just derivatives of natural gas and our country's become one of the lowest-cost producers of that feedstock. Still, I think the stock can run further.

How about Jarden (JAH)? The maker of home goods hit a 52-week high as it announced an accelerated buyback. It's been an immense winner, up 21% year to date, but it's viewed as a pent-up demand play.

Finally, there's Martin Marietta Materials (MLM), recommended by Goldman Sachs Thursday. It makes aggregates, crushed stone. That's what you need when you build new roads and housing complexes. Because it is only up 3%, people could find their way into it as a catch-up to the rest of the group.

We know the obvious ones, homebuilders, can trade back up, and there are the kitchen, bath, lumber, appliance and flooring plays. But keep the stealths in mind, especially Radian. I believe they all have further to go and are ideal for when we have the next Italian-inspired bear raid or some other superfluous decline -- at least when it comes to housing.

cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 


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19Comments
Mar 1, 2013 2:34PM
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Decent news this morning, we are hanging in there 40 point or so but be very careful; plenty of manipulators and fools trying to drop this market...Sequestration means very little if anything down here, that was Obummer trying to scare the American people...Irrelevant, what s not irrelevant is these crooks trying to take control down here and bring us down....Two and a half hours to go is a lifetime and they just started to do their thing....If sequestration was relevant we would have been in the toilet long ago..More after the close....Be very cautious.
Mar 1, 2013 11:21AM
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Mayday!  Mayday!  Sequestration has hit us full force!  Is anyone else still alive?  Hello?  Are there any other survivors?   Oh the humanity!!!  God help us all!  For the time being, we're gonna to stay locked in our barn, clinging to our guns and bibles.  Where is our fear-mongerer-in-chief when we really need him?  If anyone can hear us, we could use a really good community organizer right about now - that might be our only hope to save mankind.  Need to preserve batteries.  Will check back in at 2:00pm ET. 
Mar 1, 2013 2:59PM
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I wonder how much he has to pay that nicole to sit next to him ......
Mar 1, 2013 10:50AM
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more herd control details......  interesting......
Mar 1, 2013 3:01PM
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If the President was not warning us of potential consequences to the debacle taking place today all you wingnut religious freaks would hate him even more .......


Mar 1, 2013 11:04AM
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IF the turnaround is actually occuring, buying manufacturers of durable consumer products sounds reasonable. 

 

everyone knows i only read here, i don't invest in detail stocks yet. 

 

"but if i did" i'd look up suppliers of everything in the home depot inventory. 

 

they say "invest in what you know" which means i'd cull the list by deleting products i don't care about from the list.  then locate WHO actually manufacturers or controls these products (because many are made in china). 

 

i suspect TYCO shows up as a final owner of many of these detail suppliers.  (TYCO stands for Take You Company Over and they did truly buy almost everyone)

Mar 1, 2013 12:31PM
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The Sequester.....WILL NOT EFFECT....Any Soldiers or their Families...That is BOGUS...

 

Damn little chance that will effect ANYTHING they NEED in any CONFLICT AREA...

 

THAT IS ALSO BOGUS>>>AND A SCARE TACTIC...Don't buy all that BULLSHIDT or any...

Mar 1, 2013 11:30AM
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Yes a lot of it, is "fluff";...The lay-offs would/could occur because of "future wages" or orders.

Mainly in the Military Industrial Machine Complex...

That covers Defense Dept workers and Corporations contracting to the same..

 

Other lay-offs might occur because of tax money returned to States, for different endeavors.

Teachers maybe cops, infrastructure and the like..

Mar 1, 2013 11:03AM
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I really wonder....How many people know about or understand the Sequester ?

OR how it will effect them as Americans ??

 

There has been a lot of "confusing information" thrown about.

And is this once again, where the "squeaky wheel" gets the grease..??

Mar 1, 2013 10:49AM
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Here we go, get ready and buckle up...TGIF...TGFSs...
Mar 1, 2013 12:51PM
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"but if i did" i'd look up suppliers of everything in the home depot inventory...

 

As someone who has been tracking the shift back to American-Made, I have an alarming observation for you... it's not going to mean much as long as the same corporate platform structure remains intact. There's a structural integrity problem. Further, the younger workers aren't craft-oriented, we've lost that and need a complete divorce of job time and handheld device time. Finally, if we can't suppress and diffuse the influence of groups and lobbies, we've got nothing. You already know what they can do with all that legalese. Pray for a sudden insurgence of small businesses fortified by goon immunity.

 

Brutus-- the sequester sprayed Round-up on a dangerous weed we couldn't stop from growing. Did you expect immediate results or did you read the label? Cuts today will be readily seen on April 16th, the last day next month for a "late" payment designation. The 16th begins- "overdue." Have we heard anything at all about delinquency speeds? Nope. If we did, we'd be able to track the skidding from the cuts.

Mar 1, 2013 11:42AM
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You guys been watching too many reruns of "Revolution.."

This ain't Greece and never will be...

 

Buy Twinkies, Bread and Beer...hmmm, we no longer have Twinkies and they are watering down the Beer....Oh, SHIDT..........It has started.

Mar 1, 2013 11:06AM
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Yes they are taking/driving the "herd" down to the chutes and loading them on the trains...

 

The old legends, that the old cows passed around...Was the youngin's were being taken up North for the "better grazing lands."  hmmmmmm??

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