Homebuilder optimism has grown, according to The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) which settled at 65 in September (it had not been that high since October 2015). In an article for TheStreet, Validea CEO John Reese outlines some of the reasons for the upbeat mood and offers the following four picks that look solid based on our guru models:

• LGI Homes (LGIH) is engaged in the design, construction, marketing and sale of new homes. Consistent growth in earnings-per-share over the past five years, solid revenue growth and a modest price-sales ratio make this stock attractive.
• NVR (NVR) is engaged in the construction and sale of single-family detached homes, townhouses and condominium buildings. Earnings-per-share has grown consistently over the past five years, and its price-earnings as a percentage of EPS growth (the PEG ratio) looks good at 0.51.
• R. Horton (DHI) is engaged in the acquisition and development of land and the construction and sale of residential homes. Its inventory-to-sales ratio dipped from the prior year to an attractive 72.13%, and the PEG ratio is favorable at 0.46.
• AV Homes (AVHI) is engaged in homebuilding and community development in Florida, Arizona and the Carolinas. While this is a small-cap stock and therefore could display more volatility than the broader market, the company earns high marks for its persistent EPS growth over the last five years as well as its favorable price-to-sales ratio of 0.54.