Bears Claim Another Victim -- But They Can't Touch Our Strongest Long-Term Trade

Another biotech biggie gets creamed…

But that’s alright, since one of our biggest long-term trades is going gangbusters, and today is your chance to add to those gains.

But first, the obituary…

Short-selling scare factory Citron Research published a devastating hit piece on biotech stalwart Valeant Pharma. They’re still mopping up the blood…

The stock was already vulnerable— but it cratered 20% on the day. And it would have been a lot worse if hedge fund legend Bill Ackman hadn’t popped up out of his burrow shortly after lunch, claiming he’d bought another 2 million shares (Valeant is Ackman’s largest holding as of the second quarter).

If you were paying attention to the charts, however, there’s no way you’d be clinging to this dog on the long side…

That topping pattern is clear as day. It’s no wonder Valeant has given up all of its gains since its late 2014 rally began. Just look at that thing fly off the cliff…

Biotech’s not the only former high-flying sector that’s taken a hit recently. Remember solar stocks? These puppies were screaming higher for the better part of the past three years. But if you check out the Guggenheim Solar ETF today, you’ll find it’s 40% off its April highs.

It’s tough to find a reliable sector to trade when the major averages are in such flux—as they have been since the August swoon pushed us into correction mode. But there’s one group of stocks that’s defied the skeptics and pushed higher while the rest of the market chopped along.

I’m talking about homebuilders…

The homies have been our most reliable trade of 2015. In fact, this is our only long-term trade of the year that has survived this deep into 2015. And if you look at how strong sentiment and other homebuilder data has gotten, it’s no surprise that these stocks have barely taken their foot off the gas.

So what gives? Why are these stocks so strong right now?

“Give the Federal Reserve its due: It’s kinda sorta propped up the housing market,” our own Dave Gonigam explained over on the pages of the 5 Min. Forecast.

Can’t argue with that. Insanely low interest rates and a Fed that’s too chicken to raise ‘em even a quarter of a percent certainly isn’t hurting housing.

Neither are the numbers, which recently revealed that new construction grew 6.5% in September.

Multifamily units remain strong—and even single-family home construction is growing now. It’s no wonder. Rents are beginning to rip higher once again throughout major metro areas. Rents in Fort Meyers, FL are up nearly 24%. Sacramento saw an increase of nearly 18%. Even out of the way metros like Columbus, OH, and Tulsa, OK are up double-digits.

Add in the fact that builders have been under-building since the housing bubble burst, and you have a recipe for strong housing demand. Heck, our income specialist Zach Scheidt describes current conditions as “a perfect environment for homebuilder stocks.”

We couldn’t agree more.

The housing bull is back in action. Don’t get left behind…



Greg Guenthner
for The Daily Reckoning

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