CALC builds homes only in SoCal!

Discussion in 'Stocks' started by ultimaonliner, Aug 17, 2007.

  1. I've been looking for a good homebuilder to short, and I ran across CALC and wanted to ask your opinions on this as a short.

    "California Coastal operates in six southern California counties, which include Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura"

    Their P/B is 1.6 and the short interest was only 6.5%. When compared to the other publicly traded home builders, CALC seems overpriced and under-shorted.

    I also like the fact that the only build in just about the worst 6 counties (outside of Florida) for real estate.

    What do you guys think? Am I missing something, because this sounds too good to be true (for a short)

  2. una11


    The homebuilders are very crowded shorts by now - I think you're a little late to the party. All these newbies asking about shorting is giving me pause as well...once retail gets involved it is getting late in the game IMO.
  3. late to the game there, IMO, Coastal RE in CA will always have a Bid, this truely is a case where they aren't making any more of it.
  4. When I buy or sell a stock I like to have alot of solid reasons for doing so.
    I think you should have several solid fundamental reasons to short this stock. Just because it is a homebuilder with low short interest tells me something else entirely. Perhaps there is little short interest because the co is strong?
    I also do not like your assumption that because they build in various counties that you deem to be poor areas for a builder also isn't a good reason to short this stock.

    I would suggest you pass on this idea/guess for a trade or position until you can find better fundamental reasons for taking a short position.

    Do more digging into the finacials of the company to back up your trade.

    Based on what you sighted as reasons I'd say pass. I certainly wouldn't do it based on what you cited.
  5. First of all, thanks to everybody for their civilized replies!

    Regarding some of your feedback:

    1. I have been short on XHB, ITB, BZH, HOV, MTH for almost 2 months, but covered those recently as their P/B fell to almost 0.3.

    2. I cannot predict the manner in which residential real estate values will behave in the upcoming years, but IMHO, I believe that we will experience significant declines in So Cal. Real estate in the 6 counties that CALC builds is approximately 80% overvalued. When I now check for individual listings for specific properties in Southern California, the homes are essentially bidless. They stay on the market for months and have prices reduced. I've just begun to see homes that are listed now for their price sold in 2003--a 4 year rollback.

    3. This company has now recently developed negative cash flow with negative earnings.

    4. The $12.50 dividend they paid in Sept '06 was a special dividend paid for with debt, and they have no other dividend planned.

    5. The issues with sub-prime and the spill-over effects that have already affected the jumbo loans are not only well-known to us (investors) but have been so well publicized in the media, that this will have an increasing effect on psyche of prospective home buyers.

    6. Technically, I don't want to comment, because I'm mostly a fundamentals guy. I used to think I was a "buy and hold" type, but I noticed that I rarely hold for more than a year, with many positions ending in a few months.

    Again, I really do appreciate everybody's constructive advice!
  6. Fundamentals, on a trading site?

    Price to book?

    Deemed by Wall Street for the most part as archaic. Lower of cost or market. Under-stated fixed assets. Fully depreciated yet still turning out widgets. Over-stated current assets. Requires agings. Overall, assets subjective, liabilities rigid. And, the stock your contemplating is a negotiable paper financial instrument encompassed in BV at par. Has a "life" of its own. Traders attempt to live off that "life".

    Demographics in So. Cal resilient? Demand of the potential end user elastic or inelastic? The entire population needs some place to dwell.

    Incidently, Hovinian and Beazer have two completely different end users. Lamborghinis and Yugos, or.........per haps Porterhouses versus grass fed, frozen ground beef, reflecting your decisions as indiscriminate.

    Price to sales 2x over. Reasonable or unreasonable?

    I will say.................. insiders have nothing at stake. However, that would be consistent with the prevailing price versus where it once was. And of course, can change.

    Sub-prime flavor of the week. Not an overnight event, a process. Where were YOU at $40? Wouldn't that have been the opportune price point to short CALC? Media inspiration? BTW, what exactly IS the purpose of media?

    Chart attached. Until proven otherwise, $11ish appears to be support. Unfilled gaps. Tempting targets. Two make an island.
    Try sumpthin' simple. Invert it. Go on, try it. Consider it added perspective.

    Rather than price to book, try this: A stock is "worth" what a market maker is willing to bid for it (in accordance with his inventory agenda). And..........gaps are synthetic price points entirely at "his" discretion.

    Hopefully, the preceding Nope, I have no position here, but I am now aware of an unfilled gap for future reference. For that, I thank you. .