Why Homebuilders Like Lennar And Pulte Group Are Faring Well Despite Surging Mortgage Rates

Our theme of Housing Stocks, which includes the stocks of home improvement players, building supply companies, and home builders such as Pulte Group and Lennar
LEN
fared well thus far in 2023, rising by a solid 42% year-to-date. This compares to the S&P 500 which remains up by about 14% over the same period. So what’s driving the current outperformance?

Interestingly, PHM stock had a Sharpe Ratio of 0.7 since early 2017, which is ahead of 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.