Housing stocks back on the radar screen

Anecdotal evidence caveat aside, I consider it a strong sign that a retail company is not doing well when it is inadequately meeting my needs and poorly servicing multiple friends both in this area and other states. In addition to my experiences, consumer dissatisfaction was at such high levels the new CEO issued an apology and promised changes on the MSN message boards.

I typically do not sell a stock once I have have purchased it, but they've really peesed me off good.

Unfortunately, I bought it at 39 (instead of 33.5 like you) so I need it to go up a bit more.

Scooterbug

I agree with you that when management recognizes a problem, admits there is a problem, and does something to address the problem...that is a good sign. It may take a long time to turn things at HD especially in this tough environment. But investing in stocks is completely different .....sometimes bad news is good news for speculators because it creates the opportunity !!!!! There was much talk about a private equity player looking at Home Depot....that is squashed now. A PE investor would have gutted the company.
There has been talk of PE looking at JOE. I think something was at the discussion phase because the stock was acting suspiciously well in a very tough environment. The stock has since tumbled from the high 50's so I guess those talks fizzled. I will pounce on it if it gets to 40 because there is too much value in the company and an outsider ( a RAIDER) could extract that value. Sometimes present fundamentals, both good and bad, mask the future. The stock market is a forecasting mechanism.

I'm a neophyte investor, I know my limitations/savvy level so most of my $ is in a variety of funds where I can leave the analysis and selection to experts.

For a more personal connection/fun I buy stocks in companies I know/whose products I use and see how my general satisfaction level with the company is reflected in the overall consumer market/stock price.

Home Depot is on the chopping block because it has lost my confidence and planted itself on the scooterbug sheet list (a very bad place to be). Otherwise it would have led a happy and carefree existence for another 25-30 years.

I won't buy Joe because I have very little faith in their company's long term planning and management as a whole.

You are a "Peter Lynch" investor. Peter Lynch was the most successful fund manager in the history of Fidelity. He would discover great companies because he was at the malls with his daughter and he would always want feedback from her on the products she and her friends were interested in. He was one of the biggest and earliest investors in The Body Shop. He also was the biggest shareholder in Dunkin Donuts because he loved the concept and the product. He would invest in companies that he , the consumer, loved and used. He has written several books that I highly recommend. He was a common sense investor. Perhaps you can become the next Peter Lynch !!!

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.

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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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 !!!

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.

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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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.

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.

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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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.

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.

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.

How much of that 1200/month figure is the result of a glut in rentals versus market values? Are you waiting for the days of 150-200k for the 1200/ month rental house. Don't think we'll ever see that. More likely the rental figure will rise more than the comps will fall, but time will tell.

For the record......I have canceled my bids in the homebuilders. The only stock in the sector I am still bidding for is Lowe's 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.

I would buy Lowe's all day long. There are only 2 hardware super stores and Lowe's is clearly leading. I remember when Lowe's first came out and they were terrible to go into. But now they have watched the "Inventor" of the concept fall. Typical "Rich Mans" cycle as they say in Spain. Plus I like Gene Hackman.

How much of that 1200/month figure is the result of a glut in rentals versus market values? Are you waiting for the days of 150-200k for the 1200/ month rental house. Don't think we'll ever see that. More likely the rental figure will rise more than the comps will fall, but time will tell.

Or.....Behind Door #3: Prices and sales can stagnate for a very, very long time until inflation, deflation, stagflation and/or wages are given a chance to work their magic.





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