 Hey everyone this is Dan. There is a home construction boom happening and I believe there are three companies that will perform very well in that environment. They are DR Horton, DHI Stock Symbol, Lennar, Stock Symbol LEN and LGI Homes, Stock Symbol LGIH. Let me explain why. Most recently there is a Wall Street Journal article published on April 15, 2021 saying that the housing market is near 4 million homes short of buyer demand and Freddie Mac says the gap has widened significantly in the past two years as builders struggle to keep up. Why is it happening? That's because there's a pent up demand. Not that many people have been able to buy houses during the pandemic. There's not enough inventory in the market in the last year and also a lot of people are now moving out of the big cities into the suburb. They don't want to live in the big apartment buildings anymore. They want to live in one family houses and that's why the home builders are working hard to catch up with that demand. I'd like to mention my price targets for the three companies. For DR Horton, my target is $116 a share. For Lennar, my target is $117 and for LGI it's $180 a share by the end of December 2021 and the current prices are DHI $91.93. LEN is $100.10 and LGIH is $163.66. There's a lot of room for all three stocks to move up. Let's look at how the three stocks have been moving in the last couple of years. This chart is a daily chart starting from January 2020. Now if you look at DHI, it went up by an impressive 74.87% during this period. Lennar is about the same and then LGIH went up an even more impressive 131%. During the same time period, the S&P index only went up by 27% and the NASDAQ index as represented by the ETF QQQ went up only by about 56%. These three stocks definitely outperform the board market. There's a catch however you might notice that during the dip, which is the pandemic dip that happened between February and March of 2020, the home builders dip a lot more than the S&P or NASDAQ. Let's zoom into this segment of the chart. This is the daily chart from January 2020 to October 2020. We can see here that the three home builders went down during the pandemic dip by as much as 55% whereas S&P only went down by 32% and NASDAQ went down only by no more than 30%. That's why the home builder stocks are a lot more volatile than the S&P or NASDAQ 100. That's why the three home builder stocks are much more risky than the broad market during a market crash. I believe there's a way to take advantage of the home builder stocks when they are going up and avoid getting burned when they are crashing. I will explain that later. In meanwhile, if you like what you've seen so far, please remember to click the like, subscribe, and notification button below this video so you can be notified when I publish my next video and this is also for the sake of the YouTube algorithm. Thank you. Let's move on. Let's look at the revenues and net income of these companies. For DHI, ever since after the Great Recession from the first quarter of 2014 to the last quarter of 2020, the quarterly revenues tripled and the net income has been growing steadily as well since 2014. For Lenar, during the same period 2014 to 2020, the quarterly income quadrupled. The net income has been going up steadily as well. For LGI, from 2014 to 2020, there's a nine-time increase in quarterly revenues which is extremely impressive and the quarterly net income has been going up steadily as well. We'll look at the exact numbers corresponding to the quarterly net income increase later on. Let's look at the evaluation of these three companies. I start with the financial data for the top 10 home building companies. Look at the average PE ratio and arrive at 13. And then I use Yahoo Finance to look up their earning growth for the last five years. For DHI, it's an impressive 24.82%. For 2020, it was an impressive 46.6% earnings growth and for the next five years, Yahoo projects the earning growth to be 17.9% which is reasonable compared to their past history. And then I use the actual performance of 2020, applied a PE ratio of 13 which is about the same as the current PE ratio and will apply this earning growth of 17.9% a year and I arrive at my share price of $116 a share. Actually that's after I take a 10% discount of my calculated number just to be conservative. Similarly for LEN, Yahoo says their next five years of earning growth would be 10.7% a year and I apply a PE ratio of just 11 and I arrive at my target of $117 a share. For LGI, I apply the future earnings growth of 14.83% a year, a PE ratio of 11 and arrive at my target of $214 a share. Let's look at what the analysts have been saying about these three companies. For DHI, Yahoo Business did pricing target of $96.47 which is lower than my target of $116. Louis Navalier gives it a strong buy. TipRanks.com gives it a strong buy and the high target is $108 which is a little bit lower than my target. CN Money has a buy rating and the high target is $113 which is almost the same as my target. For LEN, my target is $117. Yahoo Business has a target of $109.15 a little bit lower than my target. Louis Navalier gives it a strong buy. TipRanks.com is a moderate buy and the high target is $120 a little bit higher than my target. CN Money has a buy rating and the high target is $120 again a little bit higher than my target. With LGI, my target is $214 that's my calculated target. Louis Navalier gives us a strong buy. TipRanks.com gives it a hold rating and the high target is $150. It's quite a bit lower than my target. CN Money gives it a hold rating and also set the high target at $150 much lower than my calculation. I'm pretty sure my calculation is accurate if it's going to perform as well as I believe it would based on the performance from the last few years. But we cannot outrun the market by too much as long as the professional analysts are saying that a target is not quite $214 or not even $170. It's difficult for LGI to reach that level in a short time. That's why tentatively I'm lowering my target to $180. I'm pretty sure in the next few months as LGI continue to demonstrate this performance the professional analysts will start to increase the target. But for now let's just settle for $180 for my new target. Let's look at the charts. This is the daily chart for DHI. As you can see it's been going up nicely since January of this year. Although today we see this big red candle and it closed at $91.93. Today DHI was down 3.96% when the broad market also went down although not by so much. S&P for example was down only 0.68%. We do have these overbought signals here from RSI and that's why the price started to dip after that spectacular bullish run. We had a bullish buy signal here from DMI and a bullish buy signal here from MACD and today we are nearly seeing a bearish sell signal from MACD. So what evolves in the next few days will be critical. Let's look at the Holly chart for DHI. As we can see it's very bearish in the last couple of days. We have this overbought signal from RSI a couple of days ago and sure enough the price started to go down. Then as of today approaching market closing we have this oversold signal from RSI and that's when the price started to turn up in the last two hours of the trading day. We have this sell signal from DMI and the sell signal from MACD. The big question is whether tomorrow the price will continue to go up even though I'm very committed to my long-time targets but for the short term we have to watch what the broad market is doing and that's why I would not buy in until I can see the price making higher highs and higher lows in the next few days. When I do buy DHI I will enter an update note below this video. So make sure to come back to this webpage and look for my update notes every once in a while. Let's look at the support and resistance levels. I see the historical resistance level at 96 and then of course the resistance level at the autumn high of 98. And then for support I see a support level at 91 which is a 20-day simple moving average and the next level down is 87 and the next level down is 84 which is the lower boiling demand on a daily chart. Let's look at Lenar Len has been going up nicely since January similar to THI. We also have this big red candle today just like DHI. Len was down 3.52% when S&P was down only 0.68%. There's nothing specifically wrong with any of the three companies for them to have this big red candle. Adjust that these stocks are more volatile when the market is going down like what we saw during the pandemic crash but I don't think they're crashing or I don't think the market is crashing at this point. We see a buy signal here from DMI and a buy signal from MACD about 2-3 weeks ago and we see a sell signal here 3-4 days ago with MACD. Let's look at the hourly chart for Lenar. Again we see this bearish trend in the last couple of days. We had this overbought signal from RSI about 3 days ago and that's when the price started to dip and then we'll have this oversold signal from RSI right before the price started to recover during the last couple of hours of today's trading session. We see a sell signal here from DMI and a sell signal here from MACD. Again the big question is whether the price will be able to make higher highs and higher lows in the next few days before we can buy in. Let's look at the support and resistance level. I see a historical resistance at 104 and then of course the resistance at the all-time high of 106. For support levels I see the next support is at 96 which is a lower bowling demand on a daily chart and then after that 94 and then 87. Let's look at LGI. We also have a big red candle today for LGI. It was down 3.84 percent when SMP was down only 0.68 percent. We have a overbought signal here from RSI. That's why it dipped today. Notice that LGI seems to be more bullish than the other two stocks because even though it went down it did not touch the Bollinger Band mid-band yet. The chart is certainly more bullish than the chart for LEN or DHI. Now looking at the DMI indicator we had a buy signal here about three or four weeks ago and it's being staying the bullish territory and we had a buy signal here from MACD up until about four days ago. Let's zoom into the hourly chart. It's a little bit bearish just today instead of the last two days like the other two stocks. Again LGI seems to be more bullish recently than the other two stocks. We have an overbought signal here from RSI and that's when the price started to dip and then it hit the lower boundary for the RSI signaling an oversold situation. That's when we see the price started to pick up and then we have a sell signal from DMI and a sell signal here from MACD on the hourly chart. Again the big question is whether the price will be able to make the higher highs and higher lows in the next few days before it can buy in. If it doesn't go up like that then it might continue to go down then we'll have to wait for the bears to exhaust themselves and start turning back upward again before we buy in. Let's look at the support and resistance levels. I see the next level of resistance at 166 and then of course the resistance will be at the all-time high of 171. For support levels I see 157 and 155 which is the 20-day simple moving average and 152. Definitely we should wait for the price to make higher lows and higher highs before we buy in. Eventually I believe the three stocks will reach the targets I mentioned in the beginning of this video but we have to respect the technical trends in the market. Let's look at how we can prevent ourselves from getting burned when there's the next market crash. I try to look at different economic indicators to see which one would predict the crash of the housing stocks. First I look at new one-family houses sold that's from the database offered by the St. Louis Federal Reserve Bank. The 2007 market crash started around October 2007 that's when S&P and Nasdaq started to dip. However D.R. Horton and most of the other housing stocks actually started to dip in July of 2005 and if you look at this chart for one-family houses sold it actually peaked out in July of 2006. That's why this chart is really lagging the home builders chart by one year. Definitely this chart is not a good leading indicator for what's going to happen with the home builders stock. Then I look at another indicator the K. Schiller National Home Price Index it peaked out in April of 2006. Again there's a time lag of nine months even though a lot of people said this K. Schiller chart correctly predicted the 2007 market crash. Yes indeed it showed a dip almost one year before the broad market started to crash but as far as predicting the dip of the home builders that's still lagging by nine months. So that's not a good indicator for these home builders stock either and then if you look at housing stock it peaked in January 2006 that's a little bit better but there's still a time lag of six months. Now then I look at new private housing units authorized by building permits. It peaked out in September of 2005 so the time lag is only two months. So far that's the best indicator I found to correctly predict or in this case to confirm that something is happening to the home builders market. Still it's lagging the stock price by two months. The number here is published by the Fed one month later so the time lag will be actually three months. The good news about this chart is that as of March 2021 we see a pretty high point here and that means the home builders market will continue to be bullish according to this chart. If I find any better leading indicator for the stock prices for these three home builders I will again add it to my update notes or I'll publish the next video so make sure you click the like subscribe and notification button below this video that will you be notified when I publish the next video. The next update for this chart from the Fed will be May 16th 2021. Definitely enter update notes or publish a video shortly after that day. Again if you are watching this video a few days after April 20th please make sure to check the update section below this video in case I've entered any update notes and if you like what you've seen so far please click the like subscribe and notification button. Thank you very much as usual I will welcome your comments questions and suggestions. Here's a recent article from US News published on March 23rd saying that the February drop in the home sales is because of the frigid weather and the snowstorms covering most of the country and sure enough in March we see a nice pickup in the housing activities. So overall things are still looking bullish. I'd like to restate my targets for DHI which is $116 a share, LEN 117, LGIH 180 to be reached by the end of 2021. At this point I'd like to mention that I'm not a financial advisor. You should make your own decision when you buy or sell stocks and you should probably consult with the financial advisors before you do so. I share my stocks trading strategies for educational purpose only. This is about wraps up my video for now. I will chat with you again in the next few days and in the meanwhile I'd like to wish you the very