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To: RealMuLan who wrote (24291)	2/24/2005 4:03:53 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Real estate stocks a hot property New Feature Powered by Ultralingua By Chet Currier Bloomberg News Thursday, February 24, 2005 Surge in home builders' shares lifts funds, but biggest gains may be past Buying and selling houses is not the only way to get in on a residential real estate boom. Just ask managers and their investors at some specialized mutual funds that have cashed in big lately on the soaring shares of home-building companies. . The Alpine U.S. Real Estate Fund, up 35.4 percent a year since mid-February 2000, and the CGM Realty Fund, with a 31.9 percent annual gain, both rank among the top five performers for the past five years among 8,000 U.S. stock and bond funds. . Those gains look all the more impressive by contrast with the Standard & Poor's 500 stock index, a broad market measure that has declined an annualized 0.7 percent over the same stretch. . Fidelity Select Construction & Housing Fund, which is up 22 percent a year since early 2000, has outdistanced the S&P 500 by at least 13 percentage points in each of the last five calendar years. Who says nobody makes a big score in the stock market any more? . These are relatively small funds, and publicly traded home builders still represent a tiny corner of the stock market. . After all the asset appreciation of the past several years, Alpine U.S. Realty held a relatively modest $463.4 million at last report, CGM Realty $832 million, and Fidelity Select Construction & Housing, $184 million. . As of midmonth, three leading home-building stocks in the S&P 500 - Pulte Homes, Centex and KB Home - together accounted for less than 0.2 percent of the index. . But home-building stocks have been potent performers: Hovnanian Enterprises surged 74.8 percent a year for the five years through the end of January, D.R. Horton gained 57.8 percent a year, and Toll Brothers rose 55.7 percent annualized. . An index made up of home builders among the S&P 500 gained 44.9 percent from the end of January 2000 through the end of January this year. That does a lot for a fund like Alpine U.S. Real Estate, which has about half of its investments in builders' stocks. . No tree grows to the sky, as they say around brokerage offices. No housing boom does, either. After such strong gains for so long, any investor with the slightest contrarian instincts might be leery of joining in the chase. . Stephen Kim of Smith Barney recently cut his ratings on six home-building stocks, predicting a "deceleration" in earnings growth and "more modest stock price performance." . Even Alpine U.S. Real Estate recognizes how hot the sector has been. . "Over the past five years, the record-breaking domestic housing boom has created an annual average increase of 12.2 percent in the value of new homes built each year," Sam Lieber, the manager, wrote in the fund's annual report published in December. . "This has combined with market share gains to drive revenue growth among public home builders of 22.2 percent per year over five years, which in turn has fueled earnings-per-share growth of 34 percent." . But Lieber said he was sticking with his home-building stocks. . "It's no longer early days, but I think there's a lot of money still to be made," he said in an interview. . "The home builders are one of those transitional opportunities you get sometimes in the stock market," he said. "They were mostly regional companies, very cyclical stocks. . "Now they are mostly national and less cyclical. The companies have evolved, and the way the business is run is much better." . Dieter Bardy, an analyst at Morningstar, wrote, "Lieber has a lengthy and successful history in real estate." . "The fund has appeal, but investors should not forget that it's not very diversified," Bardy said in the research firm's latest appraisal of Alpine U.S. Real Estate. "As a group, home builders' stocks are very volatile." . There is no question that specialized funds of this ilk are unlikely candidates as core holdings in a conservative portfolio. If diversification is a prime selling point of mutual funds for most investors, well, these funds don't offer much of that. . In some investment plans, though, there may be room for a little exploring beyond the core. For such risk capital, it is nice to see that handsome rewards can still be found every now and then. iht.com