Ahh, The Lazy Days Of Summer
And what better way to spend the summer than watching a great summer movie: The Bad News Bears in your new Hortons', Toll Brothers' or KB Homes' living room. It's also a time to look at all of the squawking about the housing market. I've done a fair amount of that squawking myself.
So, the housing bears really have been full of bad news. The housing negativity is so thick I had a slice with my favorite pizza the other night. I'm quite confident there is alot more to go but at this pace, the home builders will be paying us to buy their stock soon. (I had previously posted that I expected a bottom in housing stocks based on some time series work to be in March of 2008.) Toll Brothers is down from $60ish to $22ish in a year. In another year Toll Brothers will be at -$22. I wouldn't mind Toll Brothers paying me $22 to buy their stock but, then again, that isn't going to happen.
There are going to be alot of value players who see a PE of less than five on these stocks and soon enough, they'll start nibbling or maybe even backing up the truck. It looks like some already are. Remember, investing is not about economics. It is about investing. It isn't what you think should happen, it's what is going to happen. I'm getting signs a pretty significant bottom wants to form around these prices. If I were a fund manager, I'd be taking some positions soon. I'm greedy so not quite yet. These stocks will not make a positive move until the market does and I'm still not seeing any signs of a tradable bottom yet. We might yet get it from these levels but so far this has the makings of a sucker's rally and is much weaker than the first attempted rally of a month ago. That said, maybe the market will get a testosterone injection and surprise me.
I don't believe the management teams are quite as sophisticated as many homebuilding CEOs started believing but these are generally well run companies who made many investors wealthy. They'll be back to buy on the way down just like people did with tech post 2000. Isn't now just a perfect time for a washout? Horton's CEO said demand fell of the Richter scale and there was no clarity for improvement. The stocks are covered in blood. Long term interest rates have peaked for now and that will help to put a bid under home building stocks. There are those who believe we will have a soft landing when the Fed quits raising rates and the sun, moon and stars are aligning for future economic growth. They are going to buy these stocks.
Remember, stocks are telling you what is going to happen six to twelve months from now. So, it's your job to look six to twelve months into the future and determine what the homebuilding climate will be. Will it be washed out? Will it be worse? Will the Fed be cutting rates? No one knows. But enough value investors are likely willing to place a bet on the long side at these prices.
So, enjoy your summer. It's likely getting close to summer nap time for the bad news housing bears.
So, the housing bears really have been full of bad news. The housing negativity is so thick I had a slice with my favorite pizza the other night. I'm quite confident there is alot more to go but at this pace, the home builders will be paying us to buy their stock soon. (I had previously posted that I expected a bottom in housing stocks based on some time series work to be in March of 2008.) Toll Brothers is down from $60ish to $22ish in a year. In another year Toll Brothers will be at -$22. I wouldn't mind Toll Brothers paying me $22 to buy their stock but, then again, that isn't going to happen.
There are going to be alot of value players who see a PE of less than five on these stocks and soon enough, they'll start nibbling or maybe even backing up the truck. It looks like some already are. Remember, investing is not about economics. It is about investing. It isn't what you think should happen, it's what is going to happen. I'm getting signs a pretty significant bottom wants to form around these prices. If I were a fund manager, I'd be taking some positions soon. I'm greedy so not quite yet. These stocks will not make a positive move until the market does and I'm still not seeing any signs of a tradable bottom yet. We might yet get it from these levels but so far this has the makings of a sucker's rally and is much weaker than the first attempted rally of a month ago. That said, maybe the market will get a testosterone injection and surprise me.
I don't believe the management teams are quite as sophisticated as many homebuilding CEOs started believing but these are generally well run companies who made many investors wealthy. They'll be back to buy on the way down just like people did with tech post 2000. Isn't now just a perfect time for a washout? Horton's CEO said demand fell of the Richter scale and there was no clarity for improvement. The stocks are covered in blood. Long term interest rates have peaked for now and that will help to put a bid under home building stocks. There are those who believe we will have a soft landing when the Fed quits raising rates and the sun, moon and stars are aligning for future economic growth. They are going to buy these stocks.
Remember, stocks are telling you what is going to happen six to twelve months from now. So, it's your job to look six to twelve months into the future and determine what the homebuilding climate will be. Will it be washed out? Will it be worse? Will the Fed be cutting rates? No one knows. But enough value investors are likely willing to place a bet on the long side at these prices.
So, enjoy your summer. It's likely getting close to summer nap time for the bad news housing bears.
<< Home