In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast discuss:
- Homebuilders in a rate hike cycle.
- Are there housing stocks that aren't playing the waiting game?
- Hype cycles vs. durable trends.
- What part of the cycle fits you best?
- Mailbag: Pullback stock ideas.
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A full transcript is below.
This podcast was recorded on Sept. 17, 2026.
Tyler Crowe: Is the investing trend your friend? Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I’m your host, Tyler Crowe, and today, I’m joined by longtime Fool contributors, Matt Frankel and Jon Quast. Guys, I think it's fair. We talk about trends a lot in investing, but there is a difference between hype cycles and durable business trends and stuff like that. We're going to dig into that a little bit.
Well, we're actually going to start on the opposite end of a hype cycle and talk about an apathy cycle, and that's in housing, specifically. We're in the off season for earnings, but there's always those few off-cycle companies we're following Lennar it's the largest homebuilder in the United States so I think that qualifies here. The market shrugged at its results, but here's what stood out to me, guys, as a homebuilder. It's stock right now, trades for less than book value. To use housing terms, the market's implying the company is basically underwater. It's worth more liquidated than trying to operate it as a business anymore. Matt, you like to dig into Home Builders numbers, probably more so than anyone else in the show. We could fight over it, but I'll give you the title here. Was this really that bad? I know we just had a rate hike and everyone's scared of housing, but were the numbers really that bad?
Matt Frankel: Well, yes and no. Lennar missed on both earnings and revenue and cut its guidance, and the CEO gave pretty terrible comments.
Tyler Crowe: Like a great start.
Matt Frankel: Stock is down by 2%. Can you imagine what an AI infrastructure stock would be if it had that four pack of bad news? But Lennar, the numbers were terrible, and it's not just that they missed expectations; they're having to incentivize buyers. This could be good news if you're in the market for a house. Incentives for Lennar's closed homes have been about 12% of the selling price. That means if you're buying a $400,000 home, Lennar is giving you $50,000 or so worth of incentives. That's pretty remarkable. Construction costs are down a little bit. There's some bright spots here. The company's been buying back stock, as are a lot of other homebuilders. But it feels like Lennar and some of these other homebuilders are essentially running clearance sales on their products for the past 3-4 years, and now with the new Fed hike, there's really no end in sight. It's a pretty good time to have money to buy a home right now.
Jon Quast: There are some headwinds in the home space, aren't there, Matt? Interest rates are playing a big part of that. The president, of course, saying that he would love them 1% or less. The reality is that ain't happening. He has his guy in there; they were not able to bring rates down. In fact, they were looking at the dead and saying, we actually need to raise rates. I feel like Wesley, in the pit of despair in The Princess Bride, I would like rates to be lower. A lot of people would like rates lower and for a variety of reasons. The reality is it's not happening right now, and that is the space that we find ourselves right now.
Tyler Crowe: We've been talking about this. Jon, we've had this conversation about housing for a while. It's lousy. We've all been waiting this long time. It's well, when interest rate cuts, interest rate cuts, we're now looking at hikes again. This seems relatively similar to the story in 2022, 2023. I'm not going to say we're going to go these jumbo hikes that we saw during that time, but we're back into a credit tightening cycle. This doesn't pretend well for the housing market. It's not great and we have been talking about this for a while. It's hard to see over the next couple of years that changing. There are lots of companies that will likely be lousy investments for a while in this industry, but they're cheap. I was just saying, Lennar is trading for less than its book value. Maybe they're good investments for like 5-10 years, but I think a lot of people will be well, I don't know if I necessarily want to wait five years to wait for a payoff that may or may not come. Looking at it and being it's OK. There's maybe something worth getting at here. What are some companies in housing-related stocks that actually have near-term catalysts?
Jon Quast: Well, as far as the risk spectrum goes, you're going to be far less riskier with Lennar than the company I'm about to mention, but I do want to highlight Figure Technology Solutions. That’s ticker symbol FIGR. I believe that this business could enjoy some tailwinds given the market dynamics that we see right now.
Tyler Crowe: Figure Technologies, what exactly does it do?
Jon Quast: Figure Technology Solutions is a technology platform for home equity line of credit origination. HELOC Origination, it is a tech platform for that. It is built on blockchain technology. The value proposition is that it can originate some HELOC loans faster and more cost-effectively than maybe some other things that are out there.
Tyler Crowe: Faster and more effective. It sounds great for the business, but I guess my question is, how does that translate to cheaper rates for investors or I guess lend or people who want to take out HELOCs because one of the things that has really shouldered companies like Home Depot and Lowe's and Home Improvement stocks and a lot of these others is that people aren't using HELOCs because the rates are too high. Is what figure does actually designed to bring down rates, they're more competitive than your traditional market?
Jon Quast: Can be. It's certainly a little bit like it's reminiscent of Upstart in a way. It's trying to match credit profiles more effectively than the traditional methods. But, I push back a little bit because the trends are showing that with more people being locked into their rate, they do still want to access that capital that they have tied up in their home and traditionally, they've done that when they've sold, perhaps, or they refinance, and that's how they get it out of there. It's trapped right now, and they still don't want to give up those mortgages. The home equity line of credit, maybe not what it's been in the past, but it is showing an uptick here recently. People do want access to that cash and so the tailwind is there. What's so good about figure, in my view, is that it's not actually shouldering the financial risk that comes with the HELOCs themselves. It's essentially partnering with other financial institutions. They're the ones adopting its platform to originate more HELOCs and that is why it's able to enjoy less risk, perhaps, and also great, great profit margins. You look at this thing, 42% operating profit margin, 39% net margin. This is actually a really, really profitable business and growing fast.
Tyler Crowe: Certainly, the idea of partnering with somebody who doesn't actually have to lend right now sounds a little bit better or more appetizing in this certain environment. But, Matt, I have to imagine that's not the only places.
Matt Frankel: I agree that things are not going to get better quickly for housing. I've changed my tune on that. Anyone whose thesis is rates are going to go down needs to rethink their thesis right now. That's just what has to happen and to be honest, I have no idea where mortgage rates will be in six months, one year, etc, and neither does anyone else. Even if the Fed does exactly what you expect, mortgage rates don't necessarily track what the Fed's doing. For near-term catalysts, I’d make the argument that the best bets are on the landlords, not on the homebuilders, and what I mean by that is a higher interest rate environment for longer means that more people are going to be renting than buying.
There are two real estate investment trusts that focus on single-family rentals. They're called Invitation Homes INVH and American Homes 4Rent, not the most creative name in the world, but ticker symbol there is AMH. American Homes 4Rent especially interesting because they're insulated from that new federal mandate that, large investors can't buy single-family homes anymore. They like to build instead of buy their homes to cost advantage if they do it well. It could also be a near-term catalyst for the Home Builders. Lennar CEO specifically called out built-for-rent housing. A lot of these companies are partnering with builders as a bright spot in the quarter. But I would sum it up by saying, I don't know if the Home Builders are necessarily a 5- to 10-year investment. As you mentioned, a lot of them are trading below book value. It wouldn't take much good news to cause the market to rerate these. Homebuilding has been weak for a while, and these stocks traded for a lot more than book value for a while. Like I said, Lennar only fell 2% on a double miss, guidance cut, terrible CEO commentary. I agree that my thesis with Home Builders is a 5-10 year. But right now, the short term downside risk reward profile could be, more favorable than you think.
Tyler Crowe: Look, I don't want to come off as being like. Look, I think Home Builders are lousy. You'll actually find one or two in my own investing portfolio. It is something I have bet on in the past. It's an industry. I do and plan on keeping invested in it in the future. It's just that it's hard to see the short term catalysts that are going to be we need to do this now. For me, it almost seems like an investing window. I personally don't take any contention and be I could be lousy for a year or two. It's just HOT can be a challenging thing for investors who are trying to get into this. But that's one of the challenges here is being able to see through the short-term noise and make those long-term investments that are actually going to work, and on that topic, not only do you have the apathy cycles like we have here with housing, you can also get into hype cycles, and that's what we're going to talk about after break.
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Tyler Crowe: I was reading the Wall Street Journal this morning, just as I don't know, every middle-aged father of two seems to do at this point, and one of the discussions in the Markets Newsletter was the fading fortunes of the nuclear trade. I think last year, we saw a lot of investor enthusiasm for nuclear stocks because of all the demand for power, electrification of everything, AI infrastructure, where are we going to get all this power? Oh, it's going to come from nuclear because it's cheap. It's clean. We're not dependent on other nations for it with fossil fuels. All of the arguments that it had. But as of today, most of that enthusiasm has faded, and several of those highly touted nuclear stocks are now down 50, 70. I think one of them is even down like 88% from their all time highs.
With that, I think it's fair to say little change to the business outlook for the industry. I don't want to get too deep into nuclear specifically. I think the topic here is investing in hype cycles because there's probably a lot of investors who bought into this hype cycle around nuclear and are sitting on huge losses. It hits an immense challenge for investors. It's identifying the durable business trends versus getting caught up in the hype cycles and trying to separate one from the other. There is probably a durable trend here in terms of growth of nuclear power. Or power demand in general, but obviously there was a lot of hype that left a lot of investors burned. I've certainly gotten burned before. I think my biggest fault was betting too hard on shale drilling in, 2013, 2014, being thinking oh, it was going to revolutionize the industry. It did, and it ruined the industry at the same time and we saw lots of bankruptcies, lots of stocks basically go to zero. I think I had maybe one or two of them. I think Seadrill is one of the companies I had. But, guys, I'm assuming you guys have also had similar experiences of getting burned on these hype cycles.
Matt Frankel: You're right. Nuclear stocks have been declining for a year now. Big lessons to learn there. I think you're talking about ACLA with the 80% decliner. It was almost $200 in 2025. Now it's about 40. One of the biggest lessons about trends, and it applies to nuclear is while investors can be directionally right, I don't think any of the three of us think nuclear is going to play less of a role in the power landscape in 10 years than it does now. Things like valuation and company specific investment thesis, they still matter and you're right. I've been burned by trends before. I'm going to call myself out big time here. My big one was the 2020-2021 SPAC boom, which I wasn't the only one. You can't tell, but I'm looking at Jon right now. We both had some duds in that era. Thankfully, I limited my positions for the most part. I think Jon did, too.
But I invested in several companies, and we had some overlap here that were very hyped and were trading for valuations that simply didn't make sense and I'll call out three of mine. One was a company called 23andMe, which a lot of people know. They're the genetic testing company. There was one called Latch, which don't even get me started on that one because I might shed a tear or two. Then there's Offerpad, which, the future of real estate. They all had revenue. But not that even remotely justified their valuations. The projections were compelling, and for a while there, investors were driving these companies higher, and the momentum seemed reasonable, and money was free. These companies could borrow money whenever they wanted. But if I had just used a little quick hype check, it would have prevented some of these losses. Does the company have real revenue today or is the valuation mostly based on projections? Latch, for example, had pretty crazy projections that, in hindsight didn't make sense.
The other question is, how many things need to go right before the business is truly worth what I'm paying? 23andMe is a real business. But a lot had to go right. Their whole thesis was based on, we're going to use all of our genetic testing data to develop drugs, which in itself is not a guarantee, how many drugs actually make it through the trial process and into production. How many of those actually make the money back that it cost to develop them? A lot had to go right. That would have stopped me in my tracks right there if I just used that and another question to ask yourself in trends like nuclear, is there a boring company that will make money and do well from this trend even if the trend fizzles or takes a while? That, by the way, is why I'm using IBM to play the quantum computing trend and not one of the pure-play quantum stocks. I've been burned by trends. All we can do as investors is learn our lessons and apply them in the future.
Jon Quast: For me, personalized health and fitness, I still think that's probably a huge long-term trend, but I really saw it playing out a lot faster and a lot differently than it has so far. I really thought that wearable devices were just going to revolutionize both of those spaces. I could envision a reality in which you're wearing a wearable device. It's tracking all of your important health data and that is then transferable to a connected fitness device such as a Peloton or transferable to a remote doctor consultation, such as through Teladoc. Both of those are companies that I really saw as the trend is here. It's now, it's big, it's going to be fast, and both of those found their way into my portfolio, and both were incredible losers from there. I think it probably still is a long-term trend, but perhaps a little bit too fast, too soon, and the businesses were not quite ready to take off the way that I envisioned.
Tyler Crowe: It is always one of the more frustrating things because there can be durable trends behind them. I think perhaps one of the more frustrating things is watching a company be able to tap into that trend but not execute on it. I think there's a couple examples here of, companies that, there is something there to the idea, but there having the execution at the business level to translate that into actual revenue and earnings is always a different story than the actual trend itself. Back in the 90s, there was like this a researcher at Gartner. It developed it was called the hype cycle for emerging technologies and I feel like a lot of things we're talking about here really falls onto that. You have the rapid early innovations. It comes with this they call it like the early enthusiasm and then after like a lot of these trends here, that go through a trough of delusionment, and then this slow and steady march towards actual progress where the promises of the tech become realized and then plateau productivity. It's here. It makes sense. It's a mature market now. Not everything follows us to a precise thing, but it tends to go along there. There are plenty of examples who investors have been immensely successful in all of them, investing early, maybe waiting for the hype to die down, waiting until it's actually productive. Like the best part about investing is you can find success in any of these flavors.
Jon Quast: Tyler, I do think that we need to distinguish between the business hype cycle and the investor hype cycle because they're not necessarily the same. To circle back to nuclear, some of these nuclear stocks out there are pre-revenue, and they're expected to be pre-revenue for perhaps the next 5-10 years, you're not investing in a business at that point. You have to have a really good reason to invest in a pre-revenue company. What does it have that is going to give it some any quantifiable competitive advantage or edge or hope that it's going to be a big winner when it's not even generating any revenue yet.
There's an investor hype cycle that definitely comes to bear often in investing. There are also business hype cycles, and so those are a little bit different. Just a few years ago, if you could count up mentions on company earnings calls, and it was all about Metaverse. We're doing this in the metaverse, doing that in the metaverse and I think these companies really were trying to say, oh, here's this emerging technology that we've got to be a part of and so they were leaning in that way and turns out, there's not really anything to monetize there right now. Business hype cycle was right there at that hype and now, I'd say, you're down way, way down when it comes to expectations for the Metaverse and does it ever march back? Who knows? Blockchain was also another area, but there's definitely a difference there between what investors are hyped about and what businesses are hyped about.
Tyler Crowe: I feel like there's a form of Web 3.0 or whatever that was in there as well. But with all the different flavors of hype cycles, whether it be business hype cycles, investing hype cycles, everyone has their own flavor. But for you guys, personally, where have you found the most success as an investor? Are you jump in early and ride it through the hype or wait until the market has maturely developed? I can say from personal experience, I'm really lousy at jumping in early, and so I have found that I am more of a wait for the market has developed. Maybe that reflects on who I am as a person and, might shape why people may or agree or disagree with me. But, where do you land on that spectrum?
Jon Quast: Well, SAM's there, Tyler. When I have jumped in early on a trend, I'm definitely wrong. One trend that I jumped in on early, and I really thought that I was smart was ghost kitchens. I thought that that was going to be a huge trend. I had some investments that went to zero because I thought I was getting in early on a real trend. I had some validation there. Former Uber founder Travis Kalanick, he was putting his eggs in the Ghost Kitchen basket, really did not pan out the way I thought it would. My biggest gains and particularly dollar gains have come from a very simple business called Five Below. There is nothing revolutionary about selling stuff to teens and pre teens, but the business model made sense and by the time I invested, it was already well established and was already a substantially large company and so I did not get in from the beginning, but I've still made a lot of money investing in something fairly simple.
Tyler Crowe: We'll say you are a productivity plateau investor. Matt, what about you?
Matt Frankel: Well, I've made money getting in early on the hype cycle and made money waiting till the market's developed. I've gotten burned by investing in the middle of those two. One example I bring up from my own portfolio is Block, formerly known as Square. I invested early just a few days after its IPO, and I invested in a fintech at a time when most in person transactions were still made in cash. You could paying with a credit card at your local farmers market wasn't a thing when I invested in there. Investing early has me sitting on about an 800% gain in my portfolio in Block right now, even though it's cooled off. Investing at Peak fintech hype in about 2021 would have me sitting on a 75% loss if I had invested there. But now that the market has developed, and we see what's what with fintech, there are some good opportunities. Block itself trades for less than 20 times expected earnings this year. PayPal is another example of one that is more of a value stock right now. I've made money before and after the peak hype but never in the middle of the hype cycle.
Tyler Crowe: Well, if there's one lesson we can take from all of us, be very, very skeptical at the top of a height cycle. We'll hit the mailbag after the break.
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Tyler Crowe: Everyone, just a quick reminder, you want to get an email to us? It's podcasts @fool.com. That's with an S and if you need it, it's in the show description. Today's question comes from Greg St. Clair, and it's a little bit on that apathy hype cycle and also, we've had a discussion a lot about volatility lately and so he has a question about 10% corrections, specifically. Hi, friends. Hope you ever having a good week. I've been loving the discussion about potential 10% correction in the market in stocks and whatever. On the side for arguing, there will be a correction in the market, and it's not an if it's a when. It happens. We see cycles happen all the time. What is a company you're making sure you have in your portfolio? Thanks, Greg. Jon, what do you got?
Jon Quast: I absolutely love this question because I've been thinking about it. I actually have a decent amount of cash in my portfolio, so I am thinking about what I would buy if there was suddenly a 10% or more correction. I just want to preface this by saying waiting for correction to invest can actually be dangerous. Compounding is your friend in investing, and time is the friend of compounding. The longer we wait for correction to actually invest in something, the more we’re actually pulling away from our long-term potential because the best companies out there are compounding right now and creating long-term shareholder value. You want to be in on that.
But to directly answer Greg's question, my highest conviction businesses are already in my portfolio, for the most part, and so if we had a market correction and some of my higher conviction positions fell substantially, I already own a lot of Mercado Libre, but if it was to fall 50% or something in a market correction, I would have a really hard time not buying a lot more of that company, given my conviction to quote Warren Buffett, when it rains gold, you don't want to put out a thimble. You want to put out a bucket, and I would put out a bucket if Mercado Libre was raining down. But, as far as a company that's not in my portfolio right now that I would like it to be, Exxon Enterprise is at the top of the list, and that is Ticker AXON. This is a great company, law enforcement technology, a lot of avenues to grow its revenue base and profit for shareholders. I used to own this. I sold on valuation. I've regretted it ever since and I've been waiting for an opportunity moment and if there was a pullback here, I think that it would find its way back into my portfolio.
Matt Frankel: For averaging into positions, this is what I do. It's a close cousin to taking nibbles like Jon does and that's what I've been doing. Jon's right that waiting for corrections is a losing battle. I'd also add that with bond yields today, the Fed just made a rate hike. You can get 4% on your savings. You can get 5% from Deny Treasuries. Having cash, it actually earns something. The opportunity cost of holding some dry powder is not that bad. But to more directly answer the question, my favorite correction stock that I own is Brookfield Corporation. I don't want to talk too much about Brookfield because it's a lot to unpack, but the company makes a lot of its money by buying assets when everyone else is panicking and selling. Berkshire is another great option. They have, $365 billion in cash. Great position to benefit if we see a market correction. But like Johnson, I already owned most of my highest conviction stocks. I'd add to a lot of them if the market were to fall significantly. Those are the two that I think would have come out of a correction better than they went in.
Tyler Crowe: I'll say to Greg's question, and this is perhaps an unsatisfying answer, but with market volatility these days, I don't even know if a 10% correction or any 10% movement is really going to change much in terms of how I'm thinking about stocks or investing because things are moving so rapidly in any given moment. If you want to come back and we'll talk about 20, 30% market corrections, we can do that. But otherwise, we'll just keep as always, people in the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. Buyers sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and it's not approved by advertisers. Advertisements or sponsored content provided for informational purposes only. To see her full advertising disclosure, please check out our show notes. Thanks for producer Bart Shannon and the rest of the Motley Fool team. For Matt, Jon, and myself, thanks for listening, and we'll chat again soon.
