Intriguing Peripheral Housing Plays

 | Aug 23, 2012 | 1:30 PM EDT
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The recent bout of better-than-expected data from the housing sector has also goosed some real-estate-related companies.

One notable gainer since its public debut has been Nationstar Mortgage (NSM), a non-bank mortgage originator. The stock's March initial public offering was priced at $14, and it closed Wednesday at $26.40. That's off Friday's all-time high of $28.75, but still up 89% since the IPO.

As of Wednesday, the stock had fallen below its five-day exponential moving average, but was getting support 1% above its 15-day line. If it holds above the 15-day, and if the market rally remains in place, Nationstar could present a buy opportunity soon. However, if it continues declining, I would watch for the 50-day line as the next resting point. I would not attempt to enter this stock -- or any stock -- as it trends lower.

The stock vaulted 9% Aug. 14 following the company's second-quarter report. It's not unusual to see a bit of a selloff following an earnings-driven rally, but the stock has now retraced a good chunk of those Aug. 14 gains. The broader market sold off Tuesday, which potentially contributed to the decline, but the stock is under some of its own individual selling pressures.

The fundamental case for Nationstar is promising. Analysts are eyeing an almost unbelievable 961% earnings increase this year, to $2.44 per share. In the past three quarters, earnings have grown at triple-digit rates, with profit most recently coming in at $0.41 per share. Revenue was just over $200 million in the quarter, making for a year-over-year gain of 143%.

Another recent IPO, RealPage (RP), landed on my top small-cap screen this week. The company makes property-management and leasing software for the residential rental industry. The stock made its Nasdaq debut at $11 in August 2010.

RealPage reported year-over-year earnings increases in 2010 and 2011. It's seen growing income by 33% this year and 35% in 2013, respectively to $0.48 and $0.64 per share.

This has not made my scans until recently, and for several reasons. First, volume has been low. I generally track stocks that trade at least 300,000 shares per day on average. RealPage's volume began to pick up in February, when the stock plunged 24%, after the company missed fourth-quarter revenue views. It also issued disappointing guidance.

Since then, as the stock bottomed out, volume trends have been noticeably higher, as a glance at a weekly chart will show. As of Wednesday, its daily trading volume was just shy of 348,000.

A look at the chart will also show another factor that has kept RealPage off my screens until now -- poor price performance for more than a year. The shares jumped 8% in heavy volume Aug. 3, and have been trending higher along their five-day exponential moving average since then.

RealPage stock closed Wednesday at $25.49, slightly below its five-day exponential moving average.

As you might guess, this is a volatile stock, with a beta of 1.16. While the short-term moving average is encouraging, there's plenty of ground to make up before RealPage regains its February 52-week high of $28.97.

Columnist Conversations

volatility is quite low here, and we could see some downsides here in the short term. ...
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this chart is showing great bullish signs here, we like this to take out the old high shortly. ...



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