Go to Jeff Salisbury LWGate Home Page.From: Eric Jaenike <ericjaenike@yahoo.com>
Subject: Re: [CANSLIM] Homebuilders- fundamentals
Date: Thu, 2 May 2002 07:31:26 -0700 (PDT)
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- --0-1265331468-1020349886=:61254 Content-Type: text/plain; charset=us-ascii I agree with your thoughts, hence, no short position. The charts are also yelling long, not short. I don't think the fed will raise rates anytime soon, perhaps not even this year. Of course, all discussion is against the backdrop of extreme valuations, at least when viewed in a historic context. If one doesn't think the stocks deserve generally higher multiples because of a reduction in cyclicality (from whatever source), then the fact that comps will be difficult because of a record 2001 is bearish, because it argues for a sideways move in the stocks at best. Projections, as well as current sales trends, call for at least an 18 month slowdown relative to 2001 activity. I'm treating these as a watch and wait potential short. If I were forced to assume a position right now, it would be long, not short, primarily because of price/volume activity. However, 6 months or a year from now, things might be quite different, especially if rates/futures tick up. Hence, watch and wait, track the 10 yr, and watch for a potential top, IMHO. Eric Tom Worley <stkguru@bellsouth.net> wrote: 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. 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 ----- From: Eric Jaenike To: canslim group Sent: Thursday, May 02, 2002 10:07 AMSubject: [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 - --------------------------------- Do You Yahoo!? Yahoo! Health - your guide to health and wellness - --0-1265331468-1020349886=:61254 Content-Type: text/html; charset=us-ascii <P> I agree with your thoughts, hence, no short position. The charts are also yelling long, not short. I don't think the fed will raise rates anytime soon, perhaps not even this year. Of course, all discussion is against the backdrop of extreme valuations, at least when viewed in a historic context. If one doesn't think the stocks deserve generally higher multiples because of a reduction in cyclicality (from whatever source), then the fact that comps will be difficult because of a record 2001 is bearish, because it argues for a sideways move in the stocks at best. Projections, as well as current sales trends, call for at least an 18 month slowdown relative to 2001 activity. <P>I'm treating these as a watch and wait potential short. If I were forced to assume a position right now, it would be long, not short, primarily because of price/volume activity. However, 6 months or a year from now, things might be quite different, especially if rates/futures tick up. Hence, watch and wait, track the 10 yr, and watch for a potential top, IMHO. <P>Eric <P> <P> <B><I>Tom Worley <stkguru@bellsouth.net></I></B> wrote: <BLOCKQUOTE style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #1010ff 2px solid"> <META content="MSHTML 6.00.2715.400" name=GENERATOR> <STYLE></STYLE> <DIV><FONT face=Arial>Hi Eric,</FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV><FONT face=Arial>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. </FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV><FONT face=Arial>Low interest rates are still driving this industry</FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV><FONT face=Arial>Last year was a record, so hard to sustain or compare to</FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV><FONT face=Arial>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).</FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV><FONT face=Arial>Even after a few rate hikes, rates will still be below historic levels</FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV><FONT face=Arial>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.</FONT></DIV> <DIV><FONT face=Arial></FONT> </DIV> <DIV>Tom Worley<BR><A href="mailto:stkguru@bellsouth.net">stkguru@bellsouth.net</A><BR>AIM: TexWorley</DIV> <DIV style="FONT: 10pt arial">----- Original Message ----- <DIV style="BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A title=ericjaenike@yahoo.com href="mailto:ericjaenike@yahoo.com">Eric Jaenike</A> </DIV> <DIV><B>To:</B> <A title=canslim@lists.xmission.com href="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% 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 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.</P> <P>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.</P> <P>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.</P> <P>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.</P> <P>Eric</P> <P><BR> <HR SIZE=1> <B>Do You Yahoo!?</B><BR><A href="http://rd.yahoo.com/welcome/*http://health.yahoo.com">Yahoo! Health</A> - your guide to health and wellness </BLOCKQUOTE><p><br><hr size=1><b>Do You Yahoo!?</b><br> <a href="http://rd.yahoo.com/welcome/*http://health.yahoo.com">Yahoo! Health</a> - your guide to health and wellness - --0-1265331468-1020349886=:61254-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". 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