Ill continue my bashing streak for quite sometime. I actually will turn somewhat bullish on homebuilder once more than half are 10-20% below there 52 week lows. I wouldnt trade individual homebuilders, just better off going with XHB around 25.50-27 a share.
You're a buyer here Hydro!? You're being very reactionary...if you were actually being objective, you'd see that there is a ton of potential money to be made because loads of these companies haven't been priced accordingly. This housing slump will likely take a few years to play out due to overbuilding, tightening credit, buyer burn, oversupply, prices need to be SLASHED, bad locations, etc. If you don't see that cutting interest rates won't spur home-buying on the level that these companies will need not to get burned then you're probably not looking. Also, who loses when a bunch of homes across the country that have been selling for $500k-1M are suddenly valued at $250k-600k? I'd say that's going to cause an impact...not just industrywide...but the job losses that mount from this could fill Texas...although my guess is they'll mostly be in California and Florida.
How is it higher than "doom and gloomers" think? When you buy a car that was built in 2005 but never got sold is it sold at its original price? Of course assets are worth something, but the company that made Flowbee had assets too! Inventory + Falling demand + tightening credit + increasing foreclosures + falling consumer confidence + apprehensive buyers = LOWER STOCK PRICES AND FALLING PROFITS!! If I were standing in front of you I'd slap you and tell you to "WAKE UP!" There are going to be mounting job losses...the indicators we have are lagging...watch next month! Confidence in this industry is going to fall into a hole in the ground!
This is simple math now, at some point you do have to use your common sense. Take a look at their balance sheets and do some calculations. I say, they can dump their inventory at 50% discount without much of a problem. Some of their inventory is raw materials, so saying 50% discount is being extreme, but still good for safe value calculations. It really depends on how they price their inventory, each homie is different. I highly doubt they are using bubble value calculations, it bloats their inventory and that does not look good at any time. Back when S2007 was claiming doom and gloom, homebuilders were by their lows. Some of them were trading not far from liquidation value. This rarely happens in today's market. He could not understand why they kept going up for like 5 months, which was funny to me. I am assuming you guys can understand what liquidation value means. We are not talking about some speculative financial operations or hyped up intellectual property, but raw materials. TOL has almost $3 per share in cash alone. Just low can you expect these stocks to go? Even if you assume they are going to stop operations, which is an extreme, these companies are still worth a significant amount. All I am saying is that these doom & gloom aspects have been priced in for decades, as shown by the very low P/E ratios these stocks trade at, even during the rah rah days. Also, in case it is not obvious, the real sell off started back in 2005, all of these issues were foreseen by the smart money. I am not advocating going buying or selling, except for short term swings, honestly, I think the whole sector is gonna go into range trading at this point. And industry consolidation is the next logical step. But if you want to short them this morning for about a week or two, in my opinion, that's a good trade. I have no doubt there are bagholders who actually thought these stocks were going back to their highs.
Hydro, I resepct your opinion on this and I understand your stance with homebuilders...but not all industry players are the same. Looking BZH, you can cut their Inventory by a lot(I don't know where they build but bubble area builders are going to lose out huge!), their Goodwill is probably shot as well. Not to mention that they are probably going to lose a lot of money in the coming year or three and that doesn't really make them very attractive....low PE? Who cares if you're going to be in an industry with hardly any growth prospects for some time to come. Many of these companies carry notes and other off-balance sheet liabilities too that people don't notice even though they're right in th filings. Smart money can't be that smart if they've been playing these for a long time...because I've been playing other stocks and industries that have been doing well and came to this industry just when it's really going to get fun while apparently "smart money" has been parked here doing fairly little for the period of time they've probably had to wait. And I think the industry is probably going to implode from lenders overlending, builders overbuilding, and a whole bunch of housing that no one wants. Assets are worth something, until everyone has them and is trying to sell them cheaper.
BZH also has only 40 million shares outstanding with 150 mil in cash and 70k in receivables. That's over $5 cash per share. Their inventory needs to be investigated, because half of it could be raw materials which can be resold without a serious discount. It's never good practice to bloat your inventory and for all you and I know, it could be reported at cost, not the bubble prices. If you were to do a liquidation analysis based on common sense & reason, without the doom & gloom attitude, you would see that the downside from their current trading levels is limited. At a certain price point, it's free money for a corporate raider. So when the shorties pile on, they are completely ignoring that fact. Which is why I think the homebuilders will go into trading range. And no matter what, there is always a chance for future growth, and that's all speculators really need. It's a pretty extreme assumption that homebuilding in this country is done forever and ever. Just understand that there are players out there who run models on all aspects of the company's financial situation and do look for situations where a stock is trading close to its liquidation value. And this market is so Arbed to death that it almost never happens anymore. I honestly think that is who started buying them up from the bottom, knowing that the shorts will start covering, and even if they didn't, the downside was limited. I would not be surprised if some PE firms saw a chance to run their scheme on some homebuilders in the near future.
You can blah blah blah all you want, but the truth is that right now we don't know anything about their inventory. $5/share in cash DOESN'T mean shit! Were you joking about that? The company is at $28/share...a $5 buffer at the bottom doesn't mean anything. Materials will have to be sold at a discount no matter what. Built homes sitting in inventory, potentially at a big discount or not sold at all. Goodwill shot to hell. And yes, of course there are corporate raiders...but a company under FBI investigation isn't the prettiest picture, especially one in an ugly industry. You make it sound like I'm the "doom and gloom" king...I'm just pointing out that there is hardly anything peachy and no one knows the true value of the company, what they have, what they will have, what the FBI will find, etc. Almost everything they have is negative right now...you should be asking yourself why it is that you're desperate to point out that there's a semblance of value left there! Trusting in companies that are being investigated by the FBI isn't one of the intrinsic rules of smart investing last time I looked.
Forget, you're completely missing the point. You obviously do not have an understanding of the concepts I am talking about. And I never advocated going long & strong any homebuilder, let alone BZH. As for your comment about investigations, hahaha, look up all the publicized ones over the last 5 years and how those turned out. Also take notice how BZH was seriously lagging the HGX index the last 3 months.
I was exaggerating your point...their $5/share you mentioned is like a joke...show me where the other $20 in real value is worth? It trades on the prospect of future earnings. Those are under question as it's clearly apparent that their business may have done something wrong and therefore previous filings are unreliable! Of course I have a concept of the "topics" that you're talking about...but you're not backing them up with any solid reasoning and therefore you're leaving a giant hole in your point which is fleeting at best. If you don't care about investigations that's okay...but these investigations can ruin a business through distraction, legal expense, reputation, etc. Who needs prison. You're stuck in a stupid point and you can't get out. I never said the stock should be a $10 stock. You're the one who wielded the conspiracy theories as you usually do in stating that hedge funds might have used their contacts in government agencies to do this! You're a real piece of work with your conspiracy theories. Guess what? Bill Gates is using Mexicans to help him steal the dreams of Americans from across the border! He's coming for you!
WTF are you talking about? There is something wrong with you. A conspiracy that major institutions run excel models that always analyze the company's financials? So when a stock starts trading close to its liquidation value, based on certain researched assumptions about every aspect of that company's balance sheet, it jumps on their radar? And when they see the % of the float shorted, it would meet their criteria. Yeah, quite a conspiracy there, who would have thought. I heard they bribed the president also, while they were doing it. It's completely unthinkable that big money EVER influenced various government braches. Or that someone from a hedge fund would send a tip to a buddy in a government agency with some research behind it to raise some attention. NEVER happens. It's just a total coincidence how BZH started selling off months prior to the announcement, even while the Homebuilder index was still going up. For all the claims you make about making millions, you show a serious lack of knowledge, common sense and basic understanding. I never claimed that any homebuilder stock is worth what it is trading at now. I gave explanation as to why they are not dumping like rocks and why the ^HGX was in an uptrend for 6 months from Aug 2006. There are some fundamentals behind this, I never said I live by them but I understand them. Back in summer-fall, I did do some calculcations and evaluation on some other homebuilders and I saw why some big time institutions would come in and buy, or continue holding if they bought prior. Contrary to your views, they look at fundamentals and run proprietary calculations & evaluations, often completely ignoring technicals. Since you claimed to have made an absolute killing trading penny stocks, then you should understand that stocks trade based on future expectations a lot more than the current situation. So is it really that absurd to say that the homebuilder sales will rebound from a certain low point during this year and will re-enter a moderate growth phase sometime next year? I'll leave it at that and let's end this. You are too dense to understand that I never strongly disagreed with your doom & gloom, I'm just not biased. You are also too dense to recognize that the current situation was priced in a while ago. Notice that sell-off from mid 2005 till mid 2006, all while the news was still good to neutral? You think that's daytraders hitting bids? LOL.