Housing stocks back on the radar screen

[scooterbug44]

Great! Always glad to hear there is a "method to my madness"!

I didn't know it was the Peter Lynch method, I just figured it was basic common sense.

 

[SHELLY]

Hi Shelly,

Note post #20 and the parameters I set. I am still waiting for KBH CTX LEN and JOE to trade down further. Maybe I will see that flush to my limits, but in any event that is where I live and only for a 25% position. I still like MAS. Lightening struck with HD, which I was long and would have added to if it got to 36. LOWES.....I am still long and will add at 31 if it gets there.

It's getting close (especially for LEN now at $40-and-change).....but why not Ryland (RYL)? It's hard not to like a company whose CEO makes comments like the following:

"We do think if you're dumb enough to buy a home builder (share), you ought to buy us," Ryland Group Inc.(RYL.N: Quote, Profile, Research) Chairman and Chief Executive Officer R. Chad Dreier, told an investor audience at the JP Morgan Basics and Industrials Conference this week.

Of course one can't discount the gravitas of DHI's CEO who stated to his salesforce, "If the buyer's got a pulse, and they're warm, take them out of the market place" by getting them to sign a contract. (Although it does have an air of desperation about it.)

http://www.reuters.com/article/bondsNews/idUSN1436064720070614

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[goofer]

those quotes are music to my ears !!! if the ceo's are lamenting how terrible things are and that the world is ending.....can the bottom be that far away ?? these are classic contra indicators !!!

 

[goofer]

For the record......I have canceled my bids in the homebuilders. The only stock in the sector I am still bidding for is Lowes at 31. I reconsidered my thesis....I think it is a little too early to buy the homebuilders in this cycle. Different from Last July/QAugust time period when I last recommended them. I want to see them NOT going down on bad news. Will keep you posted.

 

[SHELLY]

For the record......I have canceled my bids in the homebuilders. The only stock in the sector I am still bidding for is Lowes at 31. I reconsidered my thesis....I think it is a little too early to buy the homebuilders in this cycle. Different from Last July/QAugust time period when I last recommended them. I want to see them NOT going down on bad news. Will keep you posted.

Goofer,

I never saw (and still don't see) future events that make homebuilder stocks a long-term buy now or in the immediate future. Historically high vacancy rates; high inventories; year-over-year sales and price decreases of both new and used homes; investulators bailing; interest rates rising; mortgages requiring proof of ability to repay shock; Realtor prayer meetings(!)--and this is during a time of full employment and a booming economy (according to Ben & W). I know it appears as if winter is here...but the straw hat salesmen apparently are holding on to their summer prices in anticipation of Global Warming.

Just what type of senario would you envision that would turn this industry around and make it a long-term buy?


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[goofer]

I have no clue.......but as I stated before when the stocks don't go down on bad news and start to trend higher, I will know the stocks are a buy. The conventional wisdom has been that once the stocks trade at or slightly below book they become a buy BUT I don't trust the numbers !!! I will start buying JOE at 40 for the long pull because I think they have the best land in Florida. I think the 35-40 price band is a very compelling area to be a long term investor in JOE.

 

[goofer]

As we have discussed ad-nauseum, STOCKS are a discounting indicator. Even though the fundamentals suck and the prospects don't look great, when stocks start to go UP on the bad news, they are telling you all the bad news has been discounted and the fundamental usually start to turn within 6 months. Stocks create tops AND bottoms in one of 2 ways.....they become too cheap (or expensive) or through the duration of time ( the stocks just bounce around and do very little for a long period of time). Where you have to be careful, is many times you get a FALSE signal like last summer but in any event you can still make money if you are lucky and wearing a strawhat. ;-) Speculation is more of an art than a science.

 

[SHELLY]

Speculation is more of an art than a science.

Last year you stated you were looking for a 50% jump holding homebuilders for 3-4 years--so I assumed you were an investor. What did you see in the homebuilders that made you decide to change camps?


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[goofer]

Difficult to explain on a message board. This is a conversation that needs to be conducted face to face....so there is give and take. I am glad I changed my mind. I made 20-30 % last year quickly rather than holding on and being even or losing money. Remember ...MORE ART THAN SCIENCE.
Lets meet for a drink I think it would be fun and maybe even profitable to exchange ideas. All are welcome.

 

[egrp]

heres my quick take on housing mkt...

There are 2 factors that are out of whack in the housing mkt:

1. Home prices as a percentage of household income are at all time highs

2. There is a disconnect between the rental mkt and the for sale mkt. meaning i can rent a $400K house for $1,200/month.

Until these 2 factors change expect continued pain in this sector...and goofer if someone put a gun to my head, i'd rather get shot than by a homebuilder right now.