PulteGroup, Inc. (PHM)

PulteGroup builds homes for three different buyers — first-time, move-up and retirement.

Splitting by buyer type is not marketing but a way to survive the cycle: when expensive mortgages knock out the young family, the buyer selling a previous home or paying cash in retirement remains. The line of communities for older buyers is especially resilient, because loans are taken less often there.

A builder's economics come down to turnover: the faster a plot becomes a sold house, the higher the return on capital. The company prefers to buy options on lots rather than the land itself, so as not to tie up cash. Risks: mortgage rates, material and labour costs, and the stock of unsold homes. The company pays a small dividend and buys back stock actively.