Housing Recovery Is Still Intact

housing-etpSo much for what some traders were cheekily calling “the housing bubble redux.” When rates on government paper started ramping up in the wake on hints of an end to quantitative easing, housing-related stocks bore more than their fair share of the equity smackdown. The SPDR S&P Homebuilders (ETF)(NYSEARCA:XHB) has lost 10% since mid-day Wednesday and is still groping for a bottom.

Simon Baker of Baker Ave Asset Management says the housing recovery is still in play. “The big question is, is housing still intact? And we very much believe it is,” he says in the attached clip. The key is avoiding the still lofty homebuilders themselves and getting long some related names.

Baker likes MGIC Investment Corp.(NYSE:MTG) a mortgage insurance provider to lenders. The notion is that higher risk borrowers aren’t getting loans at the advertised rate in the recovery. If defaults are lower than the historic rate, a company like MTG keeps the premium. Baker also thinks Wells Fargo & Co (NYSE:WFC) looks good. They have the benefit of a steepening yield curve, limited exposure to Europe or China and a decent dividend.

You can see the full “Breakout” interview below:

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