Re: [CANSLIM] Homebuilders- fundamentals

From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Homebuilders- fundamentals
Date: Thu, 2 May 2002 10:15:07 -0400
Next Article (by Date): RE: [CANSLIM] USLB "John Solarno"
Previous Article (by Date): [CANSLIM] Homebuilders- fundamentals Eric Jaenike
Top of Thread: [CANSLIM] Homebuilders- fundamentals Eric Jaenike
Articles sorted by: [Date] [Author] [Subject]
This is a multi-part message in MIME format.

- ------=_NextPart_000_0206_01C1F1C2.3C123460
Content-Type: text/plain;
	charset="iso-8859-1"
Content-Transfer-Encoding: quoted-printable

Hi Eric,

We have talked about the perception of a "bubble" in the home builders =
group for close to six months, and so far has not happened to get popped =
yet. Doesn't mean it won't. But some contrary thoughts.=20

Low interest rates are still driving this industry

Last year was a record, so hard to sustain or compare to

Until recently, most economists believed the Feds would start raising =
rates at the May meeting, now that is out the window, and even a hike at =
the June meeting is unlikely (first hike will inspire people to close on =
a mortgage deal, after which everything slows).

Even after a few rate hikes, rates will still be below historic levels

Unemployment, even when not felt personally, affects everyone to some =
degree. It is a lagging indicator, and likely will rise further before =
beginning to drop.

Tom Worley
stkguru@bellsouth.net
AIM: TexWorley
- ----- Original Message -----=20
From: Eric Jaenike=20
To: canslim group=20
Sent: Thursday, May 02, 2002 10:07 AM
Subject: [CANSLIM] Homebuilders- fundamentals


For those following the homebuilders, note that KB Home just reported a =
13.2% drop in April US orders. Of interest also is the recent insider =
selling.

Other data points: taking a 3 month average (Jan-March), new starts =
slowed at a 20% annual rate. Existing home sales fell 8.6% (reported =
4/25), and the inventory of new homes rose to 4.8 months (also reported =
4/25). Housing demand is seen slowing by the Nat'l Assoc. of Home =
Builders, who see housing starts rising 1.7% this year and falling 2.9% =
next year. They anticipate single family starts rising 2.4% in '02 and =
falling 3.6% next year. Single family sales are seen dropping 0.7% this =
year.

These stocks have generally surpassed their peak historic multiples. =
They are also closely inversely correlated with interest rates. I =
believe the weakness in mid-March came on a small spike in the 10 yrs =
yield (can someone confirm this?). Of course, the counter argument is =
that they are market share gainers, have tighter inventory and cost =
controls than previously, they don't build as much on spec, etc. and =
thus deserve higher peak cycle multiples.

I am skeptical of the group, but have no positions either long or short. =
I would be inclined to short them if they got toppy, but I think its too =
early to enter right now.

Re: CCRN adv, the secondary on 3/21 created a spike in trading volume to =
8.1 million shares, or approx 15x current adv (and 40x that times adv). =
If we assume an average day's volume on 3/21, the current adv drops to =
350k, making yesterdays volume 87% above average. Of course, that =
doesn't impact ROE, which is low, and M, which is dicey.

Eric





- -------------------------------------------------------------------------=
- -------
Do You Yahoo!?
Yahoo! Health - your guide to health and wellness

- ------=_NextPart_000_0206_01C1F1C2.3C123460
Content-Type: text/html;
	charset="iso-8859-1"
Content-Transfer-Encoding: quoted-printable

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=3DContent-Type content=3D"text/html; =
charset=3Diso-8859-1">
<META content=3D"MSHTML 6.00.2715.400" name=3DGENERATOR>
<STYLE></STYLE>
</HEAD>
<BODY bgColor=3D#ffffff>
<DIV><FONT face=3DArial>Hi Eric,</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial>We have talked about the perception of a =
"bubble" in the=20
home builders group for close to six months, and so far has not happened =
to get=20
popped yet. Doesn't mean it won't. But some contrary thoughts. =
</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial>Low interest rates are still driving this=20
industry</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial>Last year was a record, so hard to sustain or =
compare=20
to</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial>Until recently, most economists believed the =
Feds would=20
start raising rates at the May meeting, now that is out the window, and =
even a=20
hike at the June meeting is unlikely (first hike will inspire people to =
close on=20
a mortgage deal, after which everything slows).</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial>Even after a few rate hikes, rates will still be =
below=20
historic levels</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial>Unemployment, even when not felt personally, =
affects=20
everyone to some degree. It is a lagging indicator, and likely will rise =
further=20
before beginning to drop.</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV>Tom Worley<BR><A=20
href=3D"mailto:stkguru@bellsouth.net">stkguru@bellsouth.net</A><BR>AIM:=20
TexWorley</DIV>
<DIV style=3D"FONT: 10pt arial">----- Original Message -----=20
<DIV style=3D"BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A=20
title=3Dericjaenike@yahoo.com href=3D"mailto:ericjaenike@yahoo.com">Eric =
Jaenike</A>=20
</DIV>
<DIV><B>To:</B> <A title=3Dcanslim@lists.xmission.com=20
href=3D"mailto:canslim@lists.xmission.com">canslim group</A> </DIV>
<DIV><B>Sent:</B> Thursday, May 02, 2002 10:07 AM</DIV>
<DIV><B>Subject:</B> [CANSLIM] Homebuilders- fundamentals</DIV></DIV>
<DIV><BR></DIV>
<P>For those following the homebuilders, note that KB Home just reported =
a 13.2%=20
drop in April US orders. Of interest also is the recent insider =
selling.</P>
<P>Other data points: taking a 3 month average (Jan-March), new starts =
slowed at=20
a 20% annual rate. Existing home sales fell 8.6% (reported 4/25), and =
the=20
inventory of new homes rose to 4.8 months (also reported 4/25). Housing =
demand=20
is seen slowing by the Nat'l Assoc. of Home Builders, who see housing =
starts=20
rising 1.7% this year and falling 2.9% next year. They anticipate single =
family=20
starts rising 2.4% in '02 and falling 3.6% next year. Single family =
sales are=20
seen dropping 0.7% this year.</P>
<P>These stocks have generally surpassed their peak historic multiples. =
They are=20
also closely inversely correlated with interest rates. I believe the =
weakness in=20
mid-March came on a small spike in the 10 yrs yield (can someone confirm =
this?).=20
Of course, the counter argument is that they are market share gainers, =
have=20
tighter inventory and cost controls than previously, they don't build as =
much on=20
spec, etc. and thus deserve higher peak cycle multiples.</P>
<P>I am skeptical of the group, but have no positions either long or =
short. I=20
would be inclined to short them if they got toppy, but I think its too =
early to=20
enter right now.</P>
<P>Re: CCRN adv, the secondary on 3/21 created a spike in trading volume =
to 8.1=20
million shares, or approx 15x current adv (and 40x that times adv). If =
we assume=20
an average day's volume on 3/21, the current adv drops to 350k, making=20
yesterdays volume 87% above average. Of course, that doesn't impact ROE, =
which=20
is low, and M, which is dicey.</P>
<P>Eric</P>
<P><BR>
<HR SIZE=3D1>
<B>Do You Yahoo!?</B><BR><A=20
href=3D"http://rd.yahoo.com/welcome/*http://health.yahoo.com">Yahoo! =
Health</A> -=20
your guide to health and wellness</BODY></HTML>

- ------=_NextPart_000_0206_01C1F1C2.3C123460--



- -
- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim".  Do not use quotes in your email.
Go to Jeff Salisbury LWGate Home Page.