Home Builders Again

[adios]

Home builders are doing well according to the income statement. The cash flow statements and balance sheets looks to me like they're pumping the earnings into building more and more houses. Low PEs on this group which indicates to me that the market is definitely anticipating the growth in earnings to slow a lot. With the economy appearing to be doing at least moderately well perhaps worth a trade here. Toll Bros came out with a great qtr and beat street estimates handily. I'm going to look over the financial statments of these companies more closely this weekend. Thinking about spreading the money around in several names. I'll update on Tuesday if anyone is interested.

[James Boston]

Are you, at all, worried that the real estate market as a whole is going start hurting soon?

[AceHigh]

You're late...you should have bought on the dip in April. I would wait now, there will be another dip and that will be a good oppurtunity for you.

Check out HOV - they report earnings Tuesday (5/31), I think. You could try buying Tuesday morning if it isn't up too much and get a quick 5% - 10%, hopefully.

[adios]

Of course I'm worried [img]/images/graemlins/smile.gif[/img]. What kind of multiples should this group have in your opinion?

[adios]

Yeah I may be but I'm still considering, thanks for the info and advice.

[AceHigh]

Home builders is still a good section of the market, you just have to be smart about when you buy. Look for dips. Toll, Hov..etc are going to make a lot of money this year.

July/August is probably a good time frame to look to buy. I think the Fed meets the end of June, it's probably smart to wait for the Fed to buy. Plus every so often Toll takes a hit from insider trading, that is a good time to buy.

[AceHigh]

Real Estate/Home builders may slow down, it won't be hurting any time soon. Eventually home builders will stop growing, but it won't be this year or next.

People will keep buying homes and zoning laws and the government conspire to help the bigger home builders by making it difficult for the traditional small mom & pop home builders to compete. That's why companies like Toll (Tol) etc. are performing well now.

Do you really think the home builders will struggle to turn a profit any time soon?

[James Boston]

I haven't studied real estate enough to make any accurate judgements. I do think that a rise in mortgage rates may be looming. I also think there are too many proponents of no-money-down real estate, overnight millionaires, etc.. This has to be driving prices, in certain markets, way above what they should be. I, admittedly, know nothing about the company you're looking at. I'm just not excited about real estate right now.

[adios]

I would suggest that the multiples on these stocks indicate that the market is anticipating a slow down in real estate. FWIW IMO a lot of times good trades result from being generously compensated for taking the risk i.e. low multiples sometimes indicate this.

[James Boston]

I'm not going to disagree with anything you just said. However, I would prefer to see the market's reaction when the "slow down" occurs, not the reaction to the anticipation. That, IMO, is when the best opportunity presents itself.