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A contractor moves lumber for a house under construction in the Norton Commons subdivision of Louisville, Kentucky.
Because of those changes, he prefers stocks of building products makers over the homebuilders.
“They are a little bit more exposed to renovation and other international and commercial markets,” said Kim, who ranked No. 1 in Institutional Investor’s 2017 All-America research team for homebuilding and building products.
That run-up is another reason Kim believes there is more value in building products stocks.
“The valuations for the homebuilders have reached levels that are far beyond anything we’ve ever seen given the fundamental backdrop,” he said. “Frankly, 2017 was a power move largely driven by multiple expansion. The actual estimates for the homebuilders didn’t rise really that much from the beginning of the year to the end of the year.”