Stephanie Link, chief investment strategist at Hightower, moved away from Dollar General to D.R. Horton , a stock she particularly likes in a sector she deemed a smart play. Link said on Monday’s CNBC’s “Halftime Report” that she sees the trough in homebuilding coming this or next quarter, which could mean upsides for the home construction company’s stock. She pointed to data showing single-family home permits were down 7% in November from the prior month and 30% from the same month a year ago and questioned how much more the data could fall before stabilizing or starting to come up. She added that D.R. Horton has been a resilient stock though acknowledged the stock could be volatile in the near term. Shares are up 7.5% in 2023 after dropping 17.8% last year, slightly outperforming the S & P 500’s 19.4% decline. Link also said the stock trades at an attractive valuation. FactSet data shows D.R. Horton shares trade at a trailing price-to-earnings ratio of 5.8, well below the S & P 500’s 19.8 multiple. “Just in general, I think you’re at the trough,” she said of housing permits. “I just think this is one of the blue chips in housing. And so it definitely has more beta to it, absolutely. But I do think housing for 2023 into ’24 makes sense.” Link added that it’s smart for investors to have more risk exposure than last year given what is currently outperforming, while cautioning that they don’t have to get into the highest-risk household technology names. “Last year was the year to be more defensive,” Link said. “I think this year you want to be more offensive, and you’ve seen it actually in terms of growth outperforming value.” DHI 1Y mountain D.R. Horton stock chart Other “Halftime Report” committee members said they were still leaning defensive, while acknowledging there can be smart ways to expose oneself to risk. Most investors still are not open to riskier positions after how far the market fell in 2022, according to Joe Terranova, senior managing director for Virtus Investment Partners. “There appears to be more of an appetite for a lot of the higher beta plays so far in 2023,” Terranova said. “And I think that complicates the investment strategy, because I think overwhelmingly most people aren’t there.” Still, given the wide range of outlooks for this year, Bryn Talkington, managing partner of Requisite Capital Management, said Link’s play could be a way to have some exposure to growth stocks without getting too deep. “You could drive a bus through the strategists this year,” Talkington said. “I like Steph’s approach of kind of going down the middle saying, ‘Hey, I’m not going to focus on all the high-beta tech, but I’m gonna do beta in some other areas where I find aren’t so aren’t so techie, but still can give me good growth.'” Meanwhile, Link said she still thought Dollar General was a “really well-run company,” but she felt it was a defensive holding, wasn’t cheap and could find “more juice and more upside opportunity” in D.R. Horton. Despite being down 6.2% so far this year, Dollar General was able to avoid the down market and post a 4.4% advance in 2022.
