Construction stocks may weaken

NEW YORK – Home builders have been among the best performing stocks over the last several years as consumers took advantage of historically low mortgage rates. But with monthly data suggesting a slowdown in sales of new homes and economists predicting an eventual rise in rates, it may be time to eye these stocks more critically.

The Dow Jones U.S. Home Construction Index surged an astronomical 588 percent over the last five years, making it the market’s top performing industry. It’s been a leader over the last three months as well, rising 28.4 percent. And several housing stocks catapulted to new all-time highs Friday after bond yields sagged on a government report showing sluggish job growth in January.

But as hot as the housing market seems, its long run higher and signs that slower growth may lie ahead have put some professional investors on their guard. For individual investors who own these stocks, it may be time to think about collecting profits.

“We’ve begun to get cautious on them. We’ve told people to trim. Not to sell them outright, but to consider trimming, winnowing down, and take some money off the table,” said David Darst, chief investment strategist with Morgan Stanley’s individual investor group.