One of the fascinating aspects of the stock market is that stocks often trade with their industry groups.

Sometimes, a stock will trade for reasons that are considered "idiosyncratic." This means the reason it moves only concerns what is happening at that particular company.

Other times, though, an entire group will trade for the same reason.

This means that when we see an outstanding opportunity in one company, we often see similar opportunities in other companies in the same sector.

Historically, our strategy at HX Trader has taken advantage of this by buying multiple companies within the same group.

We are taking advantage of this kind of opportunity again today.

Here is the idea…

Like our last HX Trader idea, the company is another leading homebuilder. In this case, it is Atlanta, GA-based PulteGroup Inc. (NYSE: PHM) or, as it is commonly known, Pulte Homes.

The company was founded in 1950 by 18-year-old Bill Pulte as he began building and selling houses. The company went public in 1972 and has also acquired some other large homebuilders, including Del Webb and Centex.

Today, the company is the 3^rd largest homebuilder in the United States, with over 6000 employees and over $17.5 billion in revenue.

Similar to our recommendation last week - Toll Brothers, Inc. (NYSE: TOL) – the company has posted strong earnings growth over the years. Here is a table showing their EPS results over the last decade…

PHM has an even more impressive track record than TOL. They have grown EPS thirteen-fold over the period and have never had a down year. Few companies in the stock market have been able to post those kinds of results.

The company also has an admirable track record of beating analysts' estimates for earnings. This table shows their performance against those estimates over the last five years…

They have missed only two quarters over this time and have posted some very strong "beats." Compared to TOL, they have also shown significant upside more recently.

This is another impressive track record.

Companies that beat numbers force analysts to raise their estimates. Rising estimates lead to rising stock prices.

Here is the table showing the analysts’ 2025 estimates for EPS (green) versus the stock price (black) over the last couple of years…

Numbers have consistently moved higher, and the stock has moved along with the estimates.

Explosive EPS growth and beating numbers lead to strong stock price performance. Here is the five-year chart of the stock price for PHM…

At a recent high of nearly $150, the stock has been up ten-fold since the COVID bottom just a few years ago. Again, impressive performance.

Like TOL, though, you can see that the stock sold off recently.

Here is the chart of the stock price recently along with our favorite technical indicator – the relative strength index or “RSI” …

Like TOL, it has traded to a historically low RSI, which recently was below 21.

The stock has been hit for the same reason as TOL, and this is what we wrote in that report…

“The first concern has been the move higher in 30-year mortgage rates. Despite the Federal Reserve cutting short-term interest rates by -75 basis points (this means -0.75%), mortgage rates have risen since September.

This has surprised the market, but mortgage rates are still in the range where they have been for the last two and a half years. Here is that chart…

This shouldn't have much impact on the outlook for the company and hasn't had much through the end of November.

It appears the more significant concern is about the potential immigration policy of Trump. He has promised to enforce a large-scale deportation program of illegal immigrants.

TOL – as a publicly traded company – does not employ undocumented workers, but mass deportation could impact the overall availability of labor to build homes. This would drive up costs and hurt profits.

Will this happen?

We don’t know and think the eventual deportation program may be much smaller than the market expects.

However, for TOL, they are not likely to be significantly impacted. They pay some of the highest wages in the market and employ the most skilled workers. A decline in available labor at the bottom of the market will not impact them very much.”

Replace "TOL" with "PHM" and everything else remains the same.

We think the opportunity is just as attractive.

We mentioned before that the stock is trading at an RSI (below 21) that it has seldom seen. In fact, it has happened only TWO times in the last ten years!

Here is how it has performed after trading below that level…

A skeptic could argue that a sample size of two doesn't tell us much. An experienced trader would say it shows how powerful this sell-off is in the stock and IS relevant.

In this case, looking at what the stock has done when it has traded below (and back above), our traditional 30 RSI "buy" signal is also helpful. Here is that table…

This has happened a more statistically significant 16 times and – while the hit rate is not 100% - it still is strong data. The stock is up more than 80% of the time 90 days later and up almost +20%.

At HX Trader we don’t mind owning multiple opportunities in the same group if we think they are each great trades.

PHM is another excellent trade we want to move into…