DR Horton and Home Depot to Open Near 52-Week Highs - D.R. Horton (NYSE:DHI), Home Depot (NYSE:HD)

The Dow and the S&P 500 both closed down less than 1% on Friday, but were higher than at the start of last week. Also on Friday, in a positive sign for the housing sector, homebuilder DR Horton

DHI

and home-improvement retailer Home Depot

managed to reach 52-week highs -- of $13.57 and $43.30 per share, respectively -- during the trading session.

DR Horton

is expected to post its fourth consecutive profitable quarter when it reports first-quarter results on January 17, as well as revenues that are up 13.8% from year ago. This residential homebuilder is headquartered in Fort Worth, Tex., and operates in 25 states. It also has a financial services unit. This S&P 500 component was founded in 1978 and now has a market cap of $4.1 billion. Earnings per share are anticipated to grow 14.8% over the next five years. The dividend yield is 1.2%. Though the P/E and PEG ratios are higher than the industry average, 11 of 22 analysts that follow the stock rate it a Buy or Strong Buy. Their mean price target is more than 5% higher than the current share price. The share price is up almost 40% from three months ago, but only 2.5% higher than a year ago. The stock has outperformed competitors such as KB Home

KBH

and Pulte Group

PHM

over the past six months.

Home Depot

has hit a string of multiyear highs since late November. The company also recently boosted its quarterly dividend by 16% and raised its guidance for the full fiscal year. The home improvement retailer operates more than 2,200 stores, primarily in North America, but also in China. The Atlanta-based company is an S&P 500 component, has a market cap is $66.6 billion and was founded in 1978. Home Depot's dividend yield is 2.7%, its return on equity is 20.0% and the long-term EPS growth forecast is 13.7%. The P/E and PEG ratios are higher than the industry average, but so is the operating margin. Seventeen of 28 analysts following the stock recommend buying it, though the share price recently has overtaken their mean price target. The share price increased about 30% in the past 90 days and is almost 56% higher than the 52-week low back in August. The stock has outperformed rival Lowe's

LOW

and the broader markets over the past six months.

See also: Five Stocks for a Real Estate Rebound.

ACTION ITEMS: Bullish: Investors interested in exchange traded funds invested in Home Depot might want to consider the following trades:

iShares Dow Jones U.S. Home Construction ITB is about 52% higher than the 52-week low.
SPDR S&P Homebuilders XHB is more than 47% higher than the 52-week low.
PowerShares Dynamic Building & Construction PKB is more than 32% higher than the 52-week low.

Bearish: Traders leery of DR Horton may prefer to consider these alternative positions in the same industry:

Lennar LEN is up more than 68% from the 52-week low.
Toll Brothers TOL is up more than 65% from the 52-week low.
NVR NVR is up more than 28% from the 52-week low.

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