Investment idea: US Construction and Housing to capture some alpha...

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xerxes101
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Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

Hello Everybody, and Happy Thanksgiving weekend 2020!

I am usually not a market timer type of an investor but I see writings on the wall and opportunities regarding the US construction industry and I wanted to tap into the collective wisdom for a sanity check primarily but also suggestions on how to go about investing in this area, and feedback about my timing.

First, here are my perspectives and how and I analyze the situation. I believe it makes for a compelling case:

(1) Infrastructure spending: the infrastructures in this country need to be rebuilt and renovated. This requires huge amount of dollars that have to be spent at the Federal level on construction in order to achieve this objective. This has been put off by previous administrations but sooner or later this needs to be addressed.

(2) Historically low interest rates: lowest in 140 years by some accounts. This has always served as a catalyst for more construction and more home building.

(3) Reduced housing inventory: This may not be true everywhere in the US, but it holds true in my neck of the wood for sure and will force home builders to kick it up a notch.

(4) Increased demand for housing: Due to multiple factors, such as the economic cycle itself but also due to lifestyle changes as a result of COVID-19 with people upgrading or opting to live in single-family housing units located in the suburbs with more office space as they work more from home and more yard space for the family to privately enjoy and entertain.

(5) Refinance boom and rental properties: low interest rate environment and the refinancing boom is continuing and this encourages investors to invest in rental properties which also creates more housing demand.

Let the record show that I am already in on ITB which is a housing and construction ETF, but I would like to solicit other or better ideas for investing in this area in order to capitalize and capture some alpha. I am starting out with a 5% allocation of the total portfolio but I may go as high as 10% if I hear more compelling arguments / ideas. Please share your smart ideas in this journey for the benefit of all Bogleheads!

Thank you all! and by the way, God Bless America! :beer

(Disclaimer: heck yeah it's actionable :D)
Last edited by xerxes101 on Thu Dec 03, 2020 11:03 pm, edited 1 time in total.
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Sandtrap
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Sandtrap »

For some really compelling input that you request...how about post portfolio review (in forum format) for a greater long term strategy with this investment context in mind?

How much do you anticipate moving your total portfolio “needle” with 10% invested this way?

Does this increase your portfolio volatility?

Can you also make a case for REITs ?

j🌴
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02nz
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by 02nz »

You think the market doesn't know this stuff already?
Topic Author
xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

Sandtrap wrote: Sun Nov 29, 2020 1:52 pm For some really compelling input that you request...how about post portfolio review (in forum format) for a greater long term strategy with this investment context in mind?

How much do you anticipate moving your total portfolio “needle” with 10% invested this way?

Does this increase your portfolio volatility?

Can you also make a case for REITs ?

j🌴
Thanks for your input:

How much do you anticipate moving your total portfolio “needle” with 10% invested this way? In making this bet my expectation that ITB will beat VTI by 20-30% over a 3 t 5 year horizon, but obviously this is just an expectation based on current circumstances and it may not come true.

Can you also make a case for REITs ? No, because REITs are a "mixed bag." My crystal ball tells me :D that certain REITs may actually be devastated because of less demand for office space. Less demand for office space has two parts to it: (a) less demand because of current COVID-19 crisis which may bounce back after the virus situation is under control (b) less demand because certain companies are realizing that they do not need to have their employees working at the office and they can simply work from home. Part b will be the new norm.

Does this increase your portfolio volatility? I believe it does slightly because ITB is more volatile than say VTI, but I do not believe having 5-10% of ITB (vice VTI) will move the volatility needle significantly. Perhaps a nice fellow Boglehead could verify this using Portfolio Visualizer.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

02nz wrote: Sun Nov 29, 2020 1:55 pm You think the market doesn't know this stuff already?
I think the market knows this already, *but* there are still too many unknowns because of the uncertainty over the COVID-19 vaccine as well as uncertainty over the infrastructure spending...but sooner or later the Congress is going to approve this spending...too much time has passed us by and we need to just do it (I sound like a Nike commercial :D )...infrastructures in certain regions of the country are in a state of disrepair.
Firemenot
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Firemenot »

xerxes101 wrote: Sun Nov 29, 2020 2:29 pm
02nz wrote: Sun Nov 29, 2020 1:55 pm You think the market doesn't know this stuff already?
I think the market knows this already, *but* there are still too many unknowns because of the uncertainty over the COVID-19 vaccine as well as uncertainty over the infrastructure spending...but sooner or later the Congress is going to approve this spending...too much time has passed us by and we need to just do it (I sound like a Nike commercial :D )...infrastructures in certain regions of the country are in a state of disrepair.
Leverage up on two year options. Plenty of stock tied to housing market.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by RyeBourbon »

xerxes101 wrote: Sun Nov 29, 2020 2:27 pm
How much do you anticipate moving your total portfolio “needle” with 10% invested this way? In making this bet my expectation that ITB will beat VTI by 20-30% over a 3 t 5 year horizon, but obviously this is just an expectation based on current circumstances and it may not come true.

Can you also make a case for REITs ? No, because REITs are a "mixed bag." My crystal ball tells me :D that certain REITs may actually be devastated because of less demand for office space. Less demand for office space has two parts to it: (a) less demand because of current COVID-19 crisis which may bounce back after the virus situation is under control (b) less demand because certain companies are realizing that they do not need to have their employees working at the office and they can simply work from home. Part b will be the new norm.

Does this increase your portfolio volatility? I believe it does slightly because ITB is more volatile than say VTI, but I do not believe having 5-10% of ITB (vice VTI) will move the volatility needle significantly. Perhaps a nice fellow Boglehead could verify this using Portfolio Visualizer.
5 to 10% is not a lot. If it's not going to move the volatility needle significantly, it's not going to move your return significantly. If you expect ITB to outperform by 20-30% why not go all in?

I'm sticking with VTI. There's plenty of exposure to infrastructure and housing in it.
chassis
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

xerxes101 wrote: Sun Nov 29, 2020 1:45 pm Hello Everybody, and Happy Thanksgiving weekend 2020!

I am usually not a market timer type of an investor but I see writings on the wall and opportunities regarding the US construction industry and I wanted to tap into the collective wisdom for a sanity check primarily but also suggestions on how to go about investing in this area, and feedback about my timing.

First, here are my perspectives and how and I analyze the situation. I believe it makes for a compelling case:

(1) Infrastructure spending: the infrastructures in this country need to be rebuilt and renovated. This requires huge amount of dollars that have to be spent at the Federal level on construction in order to achieve this objective. This has been put off but previous administrations but sooner or later this needs to be addressed.

(2) Historically low interest rates: lowest in 140 years by some accounts. This has always served as a catalyst for more construction and more home building.

(3) Reduced housing inventory: This may not be true everywhere in the US, but it holds true in my neck of the wood for sure and will force home builders to kick it up a notch.

(4) Increased demand for housing: Due to multiple factors, such as the economic cycle itself but also due to lifestyle changes as a result of COVID-19 with people upgrading or opting to live in single-family housing units located in the suburbs with more office space as they work more from home and more yard space for the family to privately enjoy and entertain.

(5) Refinance boom and rental properties: low interest rate environment and the refinancing boom is continuing and this encourages investors to invest in rental properties which also creates more housing demand.

Let the record show that I am already in on ITB which is a housing and construction ETF, but I would like to solicit other or better ideas for investing in this area in order to capitalize and capture some alpha. I am starting out with a 5% allocation of the total portfolio but I may go as high as 10% if I hear more compelling arguments / ideas. Please share your smart ideas in this journey for the benefit of all Bogleheads!

Thank you all! and by the way, God Bless America! :beer

(Disclaimer: heck yeah it's actionable :D)
@xerxes101 Yes, this secular growth story is real. I am invested in it and satisfied so far. I'm looking to add a new position in this space but might simply add to my existing ones. This is a multi-year phenomenon, so invest and enjoy the ride for a while.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

chassis wrote: Sun Nov 29, 2020 10:23 pm
@xerxes101 Yes, this secular growth story is real. I am invested in it and satisfied so far. I'm looking to add a new position in this space but might simply add to my existing ones. This is a multi-year phenomenon, so invest and enjoy the ride for a while.
How are you "invested in it"? Do you mind sharing that info? Why are you satisfied? Is it because it is beating say VTI?
Or is it because it is growing with less volatility than you expected?
I agree that it will likely continue on for a few years.

Cheers
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

Firemenot wrote: Sun Nov 29, 2020 4:04 pm
Leverage up on two year options. Plenty of stock tied to housing market.
Would you trade long-term call options on the index or individual stocks? Which one is better in your opinion? Why?
Firemenot
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Firemenot »

xerxes101 wrote: Sun Nov 29, 2020 11:28 pm
Firemenot wrote: Sun Nov 29, 2020 4:04 pm
Leverage up on two year options. Plenty of stock tied to housing market.
Would you trade long-term call options on the index or individual stocks? Which one is better in your opinion? Why?
I don’t trade option anymore as you can be right on thesis but wrong on timing. If you want maximum upside do individual companies. Possibilities would be the home builders, Home Depot, Lowes, RPM, Sherwin-Williams, Weyerhaeuser, Georgia Pacific, etc. Needless to say, you’ll need to look at the option pricing to see if it makes sense.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Valuethinker »

Firemenot wrote: Sun Nov 29, 2020 11:42 pm
xerxes101 wrote: Sun Nov 29, 2020 11:28 pm
Firemenot wrote: Sun Nov 29, 2020 4:04 pm
Leverage up on two year options. Plenty of stock tied to housing market.
Would you trade long-term call options on the index or individual stocks? Which one is better in your opinion? Why?
I don’t trade option anymore as you can be right on thesis but wrong on timing. If you want maximum upside do individual companies. Possibilities would be the home builders, Home Depot, Lowes, RPM, Sherwin-Williams, Weyerhaeuser, Georgia Pacific, etc. Needless to say, you’ll need to look at the option pricing to see if it makes sense.
Is Georgia-Pacific still quoted? I thought Koch Industries acquired it?

If you can get hold of building suppliers that supply the trade (do Lowe's and Home Depot?) then that's probably the purest play other than a housebuilder.

The problem with call options is you are buying time value, which has a 100% chance of going away. So unless you also sell options (to extract time value), you tend to lose.

Calls work when things are apocalyptic. There was a young investor here in 2008 who, I imagine, paid for his further education via calls on the banks and financials.
Valuethinker
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Valuethinker »

xerxes101 wrote: Sun Nov 29, 2020 1:45 pm Hello Everybody, and Happy Thanksgiving weekend 2020!

I am usually not a market timer type of an investor but I see writings on the wall and opportunities regarding the US construction industry and I wanted to tap into the collective wisdom for a sanity check primarily but also suggestions on how to go about investing in this area, and feedback about my timing.

First, here are my perspectives and how and I analyze the situation. I believe it makes for a compelling case:

(1) Infrastructure spending: the infrastructures in this country need to be rebuilt and renovated. This requires huge amount of dollars that have to be spent at the Federal level on construction in order to achieve this objective. This has been put off but previous administrations but sooner or later this needs to be addressed.

(2) Historically low interest rates: lowest in 140 years by some accounts. This has always served as a catalyst for more construction and more home building.

(3) Reduced housing inventory: This may not be true everywhere in the US, but it holds true in my neck of the wood for sure and will force home builders to kick it up a notch.

(4) Increased demand for housing: Due to multiple factors, such as the economic cycle itself but also due to lifestyle changes as a result of COVID-19 with people upgrading or opting to live in single-family housing units located in the suburbs with more office space as they work more from home and more yard space for the family to privately enjoy and entertain.

(5) Refinance boom and rental properties: low interest rate environment and the refinancing boom is continuing and this encourages investors to invest in rental properties which also creates more housing demand.

Let the record show that I am already in on ITB which is a housing and construction ETF, but I would like to solicit other or better ideas for investing in this area in order to capitalize and capture some alpha. I am starting out with a 5% allocation of the total portfolio but I may go as high as 10% if I hear more compelling arguments / ideas. Please share your smart ideas in this journey for the benefit of all Bogleheads!

Thank you all! and by the way, God Bless America! :beer

(Disclaimer: heck yeah it's actionable :D)
Just be aware of policy gridlock.

To my knowledge this is c. the 4th-5th US president (elect) who has said US needs to do something about infrastructure.

My own thought is that, besides fixing bridges, the most important thing would be higher speed rural broadband -- thus allowing more Americans to move into more rural areas which have experienced declining population and opportunities.

But there's not much concrete in that.

Another would be more High Voltage transmission lines. NIMBY is a factor in that. But certainly the US could have a bigger, stronger grid - as say China does. FERC is certainly trying to incentivize that via higher returns for transmission assets.

A third if we are on the wish list would be High Speed rail - but really only makes sense in the NE corridor. If it were possible to link the Golden Horseshoe (in effect, Toronto to Buffalo) with a HS rail link to NYC, that would be amazing -- but I think there are serious geographic and economic obstacles.

A
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dziuniek
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by dziuniek »

Buy land / 2nd house. Speculate on the appreciation :twisted:
Get rich or die tryin'
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

RyeBourbon wrote: Sun Nov 29, 2020 10:06 pm
5 to 10% is not a lot. If it's not going to move the volatility needle significantly, it's not going to move your return significantly. If you expect ITB to outperform by 20-30% why not go all in?
Thanks for the question, the reason I don't go all in is because I am trying to invest, not gamble...and also I am looking for ideas that would minimize volatility while at the same time increasing the gain.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by RyeBourbon »

xerxes101 wrote: Mon Nov 30, 2020 9:07 pm
RyeBourbon wrote: Sun Nov 29, 2020 10:06 pm
5 to 10% is not a lot. If it's not going to move the volatility needle significantly, it's not going to move your return significantly. If you expect ITB to outperform by 20-30% why not go all in?
Thanks for the question, the reason I don't go all in is because I am trying to invest, not gamble...and also I am looking for ideas that would minimize volatility while at the same time increasing the gain.
I don't think it will minimize volatility - it will increase volatility.
chassis
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

xerxes101 wrote: Sun Nov 29, 2020 11:25 pm
chassis wrote: Sun Nov 29, 2020 10:23 pm
@xerxes101 Yes, this secular growth story is real. I am invested in it and satisfied so far. I'm looking to add a new position in this space but might simply add to my existing ones. This is a multi-year phenomenon, so invest and enjoy the ride for a while.
How are you "invested in it"? Do you mind sharing that info? Why are you satisfied? Is it because it is beating say VTI?
Or is it because it is growing with less volatility than you expected?
I agree that it will likely continue on for a few years.

Cheers
I am invested in shares of US equities. I am satisfied because the shares are doing well. I prefer not to elaborate further, especially on this site. This site has a particularly strong vein of group think, centered on the idea that all investors should hold only VTSAX in their portfolios.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

chassis wrote: Mon Nov 30, 2020 9:29 pm
xerxes101 wrote: Sun Nov 29, 2020 11:25 pm
chassis wrote: Sun Nov 29, 2020 10:23 pm
@xerxes101 Yes, this secular growth story is real. I am invested in it and satisfied so far. I'm looking to add a new position in this space but might simply add to my existing ones. This is a multi-year phenomenon, so invest and enjoy the ride for a while.
How are you "invested in it"? Do you mind sharing that info? Why are you satisfied? Is it because it is beating say VTI?
Or is it because it is growing with less volatility than you expected?
I agree that it will likely continue on for a few years.

Cheers
I am invested in shares of US equities. I am satisfied because the shares are doing well. I prefer not to elaborate further, especially on this site. This site has a particularly strong vein of group think, centered on the idea that all investors should hold only VTSAX in their portfolios.
Yes, I agree with you and I do respect your decision not wanting to share, but people here do talk about "play money"...maybe you can talk about it in that vein? :D
chassis
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

xerxes101 wrote: Mon Nov 30, 2020 10:00 pm
chassis wrote: Mon Nov 30, 2020 9:29 pm
xerxes101 wrote: Sun Nov 29, 2020 11:25 pm
chassis wrote: Sun Nov 29, 2020 10:23 pm
@xerxes101 Yes, this secular growth story is real. I am invested in it and satisfied so far. I'm looking to add a new position in this space but might simply add to my existing ones. This is a multi-year phenomenon, so invest and enjoy the ride for a while.
How are you "invested in it"? Do you mind sharing that info? Why are you satisfied? Is it because it is beating say VTI?
Or is it because it is growing with less volatility than you expected?
I agree that it will likely continue on for a few years.

Cheers
I am invested in shares of US equities. I am satisfied because the shares are doing well. I prefer not to elaborate further, especially on this site. This site has a particularly strong vein of group think, centered on the idea that all investors should hold only VTSAX in their portfolios.
Yes, I agree with you and I do respect your decision not wanting to share, but people here do talk about "play money"...maybe you can talk about it in that vein? :D
@xerxes101 It's real money, not play money. I refrain from talking about stock tickers on any financial forum because it often degenerates into unproductive and off topic debate. I was in ITB for a while and found something better. You need to build your own stock screen and use your own criteria. This is how you learn and how to increase your convictions in your portfolio and your investing style.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

dziuniek wrote: Mon Nov 30, 2020 9:55 am Buy land / 2nd house. Speculate on the appreciation :twisted:
Like that... :thumbsup, know any good agents? :D JK
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by dziuniek »

xerxes101 wrote: Mon Nov 30, 2020 11:32 pm
dziuniek wrote: Mon Nov 30, 2020 9:55 am Buy land / 2nd house. Speculate on the appreciation :twisted:
Like that... :thumbsup, know any good agents? :D JK
Hey, if the house is pricey enough wait a bit and I'll go get mine :D haha
Get rich or die tryin'
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

Latest construction spending data released by the Census Bureau and available on the FRED data warehouse.

Strong results.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Valuethinker »

xerxes101 wrote: Mon Nov 30, 2020 11:32 pm
dziuniek wrote: Mon Nov 30, 2020 9:55 am Buy land / 2nd house. Speculate on the appreciation :twisted:
Like that... :thumbsup, know any good agents? :D JK
I think there are US Residential REITs (ETFs of)?

It's probably your purest play, albeit current restrictions on evictions have probably hit returns. Many of the inhabitants of rental properties are really hurting in this recession.

Otherwise "roll your own" of, say, the top 10 housebuilders & builders merchants & maybe manufacturers (try to aim for things where the USA has a locational advantage due to cheap input costs, eg natural gas, or due to high costs of transport (large volume, low value goods)).

Emerson Electric comes to mind as a play. Also Schneider (French). To the extent that these groups are into US consumer/ housing markets -- they are, but as part of far larger groups.

Louisiana Pacific was a classic housing play, but I have no idea if they are still quoted. They invented a lot of the glue-laminated beam and board products that are now widely used.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by tibbitts »

The obvious question for the OP: why do you believe you can gain an advantage by interpreting this publicly-available information? The average investor interpretation is already incorporated into the market. If you believe your analysis makes for a "compelling case", why is it different from the interpretation of the average investor?
chassis
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

@xerxes101 there have been a few, not many, helpful comments on this thread so far.

(Residential) construction has many entry points for investors. Warren Buffett owns a brick manufacturer, as one example.

Financial sector: mortgage bankers
Real estate: REITs
Industrials: material and product manufacturers
Service providers: home builders

Buy what you know. Stocks always go up in the long term.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

tibbitts wrote: Tue Dec 01, 2020 12:23 pm The obvious question for the OP: why do you believe you can gain an advantage by interpreting this publicly-available information? The average investor interpretation is already incorporated into the market. If you believe your analysis makes for a "compelling case", why is it different from the interpretation of the average investor?
Thank you for your thoughtful question. I believe uncertainty over (a) COVID-19 and coronavirus vaccine rollout (b) infrastructure spending due to politics and gridlock, and (c) the US stimulus bill has "masked" average investor's interpretation.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Olemiss540 »

At what inventory level, interest rate, or level of return on investment will you sell? Remember that sector bets are just like any other speculation in you need to know when to buy AND when to sell to have any hope of beating the market.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

dziuniek wrote: Tue Dec 01, 2020 9:50 am
Hey, if the house is pricey enough wait a bit and I'll go get mine :D haha
Have no time to wait...this is perishable information, and remember I am making a "compelling case" 8-) ... or so I hope :beer
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

Olemiss540 wrote: Wed Dec 02, 2020 7:56 am At what inventory level, interest rate, or level of return on investment will you sell? Remember that sector bets are just like any other speculation in you need to know when to buy AND when to sell to have any hope of beating the market.
I like your spirit...already thinking about the "exit strategy" :D ...I don't sell, I rebalance!...for at least the next 2 years.
rkms4
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by rkms4 »

You may have missed your opportunity with ITB .. its trading at $56/share, off the low earlier in the year of $22.39. Not sure it has much more room to run ... housing is cyclical, always has been
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

Yes, housing is cyclical. Measured in 10 year chunks. The current housing expansion by my estimation started in early 2018. So a good bit of time left for investors to make money.

Another investing avenue is real estate agencies. Buffett bought Prudential, I think the current branding is Berkshire Hathaway Real Estate.

ITB has a couple of duds in it. Do your homework and caveat emptor.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

chassis wrote: Wed Dec 02, 2020 8:43 am Yes, housing is cyclical. Measured in 10 year chunks. The current housing expansion by my estimation started in early 2018. So a good bit of time left for investors to make money.

Another investing avenue is real estate agencies. Buffett bought Prudential, I think the current branding is Berkshire Hathaway Real Estate.

ITB has a couple of duds in it. Do your homework and caveat emptor.
It is interesting Buffet also owns a mortgage lending company that I did not know about.
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

rkms4 wrote: Wed Dec 02, 2020 8:06 am You may have missed your opportunity with ITB .. its trading at $56/share, off the low earlier in the year of $22.39. Not sure it has much more room to run ... housing is cyclical, always has been
I do not agree. I bet $22.39 low was due to COVID-19 sell off back in March.
chassis
Posts: 424
Joined: Tue Mar 24, 2020 4:28 pm

Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

@xerxes101 don’t listen to the avalanche of naysaying on this site. It is prevalent, unfortunately. It seems to be symptomatic of the lack of balanced financial discussion fora choices. Each has its quirks, this one’s is groupthink.

Discussion sites I am aware of:

Bogleheads
Early-retirement
Mr money moustache
White coat investor

Wci seems to have some element of balance, as does early-retirement. Bogleheads seems to have been around the longest, so has depth going for it. However its biggest shortcoming in my view is groupthink bias.
Topic Author
xerxes101
Posts: 452
Joined: Sat Oct 14, 2017 11:25 am

Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

chassis wrote: Wed Dec 02, 2020 10:40 am @xerxes101 don’t listen to the avalanche of naysaying on this site. It is prevalent, unfortunately. It seems to be symptomatic of the lack of balanced financial discussion fora choices. Each has its quirks, this one’s is groupthink.

Discussion sites I am aware of:

Bogleheads
Early-retirement
Mr money moustache
White coat investor

Wci seems to have some element of balance, as does early-retirement. Bogleheads seems to have been around the longest, so has depth going for it. However its biggest shortcoming in my view is groupthink bias.
@chassis - thank you for your suggestions. They are useful.
Olemiss540
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Olemiss540 »

chassis wrote: Wed Dec 02, 2020 10:40 am @xerxes101 don’t listen to the avalanche of naysaying on this site. It is prevalent, unfortunately. It seems to be symptomatic of the lack of balanced financial discussion fora choices. Each has its quirks, this one’s is groupthink.

Discussion sites I am aware of:

Bogleheads
Early-retirement
Mr money moustache
White coat investor

Wci seems to have some element of balance, as does early-retirement. Bogleheads seems to have been around the longest, so has depth going for it. However its biggest shortcoming in my view is groupthink bias.
Bogleheads forum is a place to FOSTER the groupthink. We are here because we are trying to learn how to handle our money in accordance with these values. If I wanted to learn about real estate investing I would go to a specific real estate forum.

It's not a negative, quite the opposite. The reason for its prevalence is because of it's long standing success.

"Bogleheads emphasize starting early, living below one's means, regular saving, broad diversification, and sticking to one's investment plan."

It may be boring but it works. Alpha is exciting but chasing it is a fool's errand.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Firemenot
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Firemenot »

Olemiss540 wrote: Thu Dec 03, 2020 8:09 am
chassis wrote: Wed Dec 02, 2020 10:40 am @xerxes101 don’t listen to the avalanche of naysaying on this site. It is prevalent, unfortunately. It seems to be symptomatic of the lack of balanced financial discussion fora choices. Each has its quirks, this one’s is groupthink.

Discussion sites I am aware of:

Bogleheads
Early-retirement
Mr money moustache
White coat investor

Wci seems to have some element of balance, as does early-retirement. Bogleheads seems to have been around the longest, so has depth going for it. However its biggest shortcoming in my view is groupthink bias.
Bogleheads forum is a place to FOSTER the groupthink. We are here because we are trying to learn how to handle our money in accordance with these values. If I wanted to learn about real estate investing I would go to a specific real estate forum.

It's not a negative, quite the opposite. The reason for its prevalence is because of it's long standing success.

"Bogleheads emphasize starting early, living below one's means, regular saving, broad diversification, and sticking to one's investment plan."

It may be boring but it works. Alpha is exciting but chasing it is a fool's errand.
There are some tone issues that are not as prevalent as on other boards.
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vineviz
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by vineviz »

xerxes101 wrote: Wed Dec 02, 2020 7:50 am
tibbitts wrote: Tue Dec 01, 2020 12:23 pm The obvious question for the OP: why do you believe you can gain an advantage by interpreting this publicly-available information? The average investor interpretation is already incorporated into the market. If you believe your analysis makes for a "compelling case", why is it different from the interpretation of the average investor?
Thank you for your thoughtful question. I believe uncertainty over (a) COVID-19 and coronavirus vaccine rollout (b) infrastructure spending due to politics and gridlock, and (c) the US stimulus bill has "masked" average investor's interpretation.
The "average" investor isn't who you're betting against. You're betting against other investors with much more information than you have, more capital than you have, and less optimism than you have. That's not a recipe for success.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

vineviz wrote: Thu Dec 03, 2020 8:33 am
xerxes101 wrote: Wed Dec 02, 2020 7:50 am
tibbitts wrote: Tue Dec 01, 2020 12:23 pm The obvious question for the OP: why do you believe you can gain an advantage by interpreting this publicly-available information? The average investor interpretation is already incorporated into the market. If you believe your analysis makes for a "compelling case", why is it different from the interpretation of the average investor?
Thank you for your thoughtful question. I believe uncertainty over (a) COVID-19 and coronavirus vaccine rollout (b) infrastructure spending due to politics and gridlock, and (c) the US stimulus bill has "masked" average investor's interpretation.
The "average" investor isn't who you're betting against. You're betting against other investors with much more information than you have, more capital than you have, and less optimism than you have. That's not a recipe for success.
I really like this response, here is the way I look at it:

You're betting against other investors with much more information than you have (True)
more capital than you have (True)
and less optimism than you have (I am assuming you are referring to all individuals/institutions who take short positions)
That's not a recipe for success (I strongly disagree, on the contrary this is exactly the recipe of my success. In fact one of the reasons I believe this sector is undervalued is because I believe it is heavily shorted and once the issues I cited above are resolved the shorties will have to run for the exit big time!) :twisted:
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vineviz
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by vineviz »

xerxes101 wrote: Thu Dec 03, 2020 8:53 am
vineviz wrote: Thu Dec 03, 2020 8:33 am
xerxes101 wrote: Wed Dec 02, 2020 7:50 am
tibbitts wrote: Tue Dec 01, 2020 12:23 pm The obvious question for the OP: why do you believe you can gain an advantage by interpreting this publicly-available information? The average investor interpretation is already incorporated into the market. If you believe your analysis makes for a "compelling case", why is it different from the interpretation of the average investor?
Thank you for your thoughtful question. I believe uncertainty over (a) COVID-19 and coronavirus vaccine rollout (b) infrastructure spending due to politics and gridlock, and (c) the US stimulus bill has "masked" average investor's interpretation.
The "average" investor isn't who you're betting against. You're betting against other investors with much more information than you have, more capital than you have, and less optimism than you have. That's not a recipe for success.
I really like this response, here is the way I look at it:

You're betting against other investors with much more information than you have (True)
more capital than you have (True)
and less optimism than you have (I am assuming you are referring to all individuals/institutions who take short positions)
That's not a recipe for success (I strongly disagree, on the contrary this is exactly the recipe of my success. In fact one of the reasons I believe this sector is undervalued is because I believe it is heavily shorted and once the issues I cited above are resolved the shorties will have to run for the exit big time!) :twisted:
If you're not familiar with the book "The Winner's Curse" by Richard Thaler, I recommend you read it. It's quite old, so used copies and be had very inexpensively.

Think about what you're doing: at the moment you buy this ETF you're jumping into a market filled with people who are smarter, faster, and better equipped than you are with a belief that your optimistic view of the ETF is more accurate than ANY of their views.

Over-confidence in the investing is THE deadliest sin. I'm not predicting that there is no money to be made in this ETF and I'm not morally opposed to taking small gambles in the portfolio in the right circumstances.

I can say, however, that my experience in having worked with and for some of the world's best investors tells me that if you're not entering the trade thinking "I'm probably wrong about this, and here are ten ways this might go badly" then you haven't done enough research.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Olemiss540
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by Olemiss540 »

Firemenot wrote: Thu Dec 03, 2020 8:18 am
Olemiss540 wrote: Thu Dec 03, 2020 8:09 am
chassis wrote: Wed Dec 02, 2020 10:40 am @xerxes101 don’t listen to the avalanche of naysaying on this site. It is prevalent, unfortunately. It seems to be symptomatic of the lack of balanced financial discussion fora choices. Each has its quirks, this one’s is groupthink.

Discussion sites I am aware of:

Bogleheads
Early-retirement
Mr money moustache
White coat investor

Wci seems to have some element of balance, as does early-retirement. Bogleheads seems to have been around the longest, so has depth going for it. However its biggest shortcoming in my view is groupthink bias.
Bogleheads forum is a place to FOSTER the groupthink. We are here because we are trying to learn how to handle our money in accordance with these values. If I wanted to learn about real estate investing I would go to a specific real estate forum.

It's not a negative, quite the opposite. The reason for its prevalence is because of it's long standing success.

"Bogleheads emphasize starting early, living below one's means, regular saving, broad diversification, and sticking to one's investment plan."

It may be boring but it works. Alpha is exciting but chasing it is a fool's errand.
There are some tone issues that are not as prevalent as on other boards.
There are not many boards I have frequented that have such an esteemed group of known experts in their field participating regularly. There are also a few posters with which carry a tone very specific to their personalities that frequent the board that might want to be partially/fully ignored.

As a whole, the moderators here keep everything extremely on topic and civil MUCH MORE than any other board I have participated in both financial and hobby/interest based. These are just my opinion but wanted to follow up on your tone comment since there are quite a few members posting that are new to the board and think the perspective may be helpful in sticking around.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Topic Author
xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

vineviz wrote: Thu Dec 03, 2020 9:10 am
If you're not familiar with the book "The Winner's Curse" by Richard Thaler, I recommend you read it. It's quite old, so used copies and be had very inexpensively.

Think about what you're doing: at the moment you buy this ETF you're jumping into a market filled with people who are smarter, faster, and better equipped than you are with a belief that your optimistic view of the ETF is more accurate than ANY of their views.

Over-confidence in the investing is THE deadliest sin. I'm not predicting that there is no money to be made in this ETF and I'm not morally opposed to taking small gambles in the portfolio in the right circumstances.

I can say, however, that my experience in having worked with and for some of the world's best investors tells me that if you're not entering the trade thinking "I'm probably wrong about this, and here are ten ways this might go badly" then you haven't done enough research.
Vineviz, I can very easily say from your comments that you are a thoughtful investor. Thank you for your book recommendation also, I will check it out...you are making too much work for me now because I have to go find your other posts and read them... :D

"I can say, however, that my experience in having worked with and for some of the world's best investors tells me that if you're not entering the trade thinking "I'm probably wrong about this, and here are ten ways this might go badly" then you haven't done enough research."

I can not claim that I have worked with the world's best investors, but I have observed, followed, and read about them.

I am in fact entering the trade with that mindset, because otherwise instead of 5% I would have done 10, 25 or 50%. I believe that would not be prudent, and my thinking here is that the chance of a decent gain outweighs the risk. The other facet about investing, just like the one you mentioned above, is that I have witnessed highly competent investors disagree about fundamental issues, so investing is a complex process by nature. If you carefully look at and analyze what I have said in this thread, I believe I have clearly outlined what could go wrong: (1) the risk that (God forbid) COVID-19 vaccine will not succeed in containing this pandemic (2) The risk that Congress does not agree on a stimulus bill or delays it, and (3) The risk that the infrastructure spending bill will get delayed again. I am sure I can think of seven more if people are interested :twisted:

Best
000
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by 000 »

xerxes101 wrote: Sun Nov 29, 2020 1:45 pm (1) Infrastructure spending: the infrastructures in this country need to be rebuilt and renovated. This requires huge amount of dollars that have to be spent at the Federal level on construction in order to achieve this objective. This has been put off but previous administrations but sooner or later this needs to be addressed.

(2) Historically low interest rates: lowest in 140 years by some accounts. This has always served as a catalyst for more construction and more home building.
One approach is to do a thought experiment about how they're going to pay for all that.

BTW, I don't think that significantly increased government infrastructure spending is likely.
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xerxes101
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by xerxes101 »

ITB (yesterday's close): $55.37 USD +1.66 (3.09%)...just trying to cheer it on...(probably just some short-term noise) :sharebeer
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CardinalRule
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by CardinalRule »

xerxes101 wrote: Fri Dec 04, 2020 5:28 am ITB (yesterday's close): $55.37 USD +1.66 (3.09%)...just trying to cheer it on...(probably just some short-term noise) :sharebeer
Obviously the market in general has been strong, but I had almost forgotten about that I had allocated a little of my equity holdings to ITB on April 3, 2020, as the pandemic began, in a small IRA that I have. I paid $26.25, and on Friday it was $77.03! Looks like D.R. Horton and Lennar are still the biggest holdings.

Had there been a proper airline ETF, I might have dabbled in that instead, as a contrarian play. But I was certainly happy to see how well ITB has done.
chassis
Posts: 424
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Re: Investment idea: US Construction and Housing to capture some alpha...

Post by chassis »

CardinalRule wrote: Sun May 09, 2021 10:19 am
xerxes101 wrote: Fri Dec 04, 2020 5:28 am ITB (yesterday's close): $55.37 USD +1.66 (3.09%)...just trying to cheer it on...(probably just some short-term noise) :sharebeer
Obviously the market in general has been strong, but I had almost forgotten about that I had allocated a little of my equity holdings to ITB on April 3, 2020, as the pandemic began, in a small IRA that I have. I paid $26.25, and on Friday it was $77.03! Looks like D.R. Horton and Lennar are still the biggest holdings.

Had there been a proper airline ETF, I might have dabbled in that instead, as a contrarian play. But I was certainly happy to see how well ITB has done.
Congratulations on the multi-bagger!
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