Homebuilder stocks are on a hot streak.
The ITB home construction ETF hit an all-time high Wednesday, led by Lennar after its earnings beat and decision to spin off its tech investment and commercial mortgage businesses. That ETF has risen nearly 200% since its lows last March.
But, housing activity appears to have cooled off. Housing starts declined 10.3% in February, a deeper drop than expected, as colder weather across the U.S. curtailed construction. Rising interest rates and higher lumber costs could also hinder the industry.
The stocks still look like a buy, even if those headwinds trigger a pullback, according to Quint Tatro, president of Joule Financial.
"I think you've got to buy them," Tatro told CNBC's "Trading Nation" on Wednesday. "The strength in the midst of those negative numbers is an indication here that there is a lot of upside opportunity. I think there's weather, but then there's input cost. … If that translates to a decline in housing stocks, I think that they're a buy here."
Tatro said Lennar is an example of a name that could be a buy. He notes its 10 times forward earnings multiple as one reason to find the stock attractive. It rose 14% on Wednesday following earnings.
"We think that the housing cycle really is still in the early stages and these stocks have a tremendous amount of upside," he said.
Delano Saporu, founder of New Street Advisors, agreed that there's more to like in the space than not.
"The story is still positive," Saporu said during the same interview. "People are looking to accommodate the stay-at-home play, so they want to be in places where they can work from home."
He said Lennar is attractive, but also points to D.R. Horton as having potential in this group, especially its exposure to the single-family starter home market.
"That's their area of expertise, and that's the area they put their strategy to work," said Saporu. "I think this is a very good area to look [at]."