http://seekingalpha.com/article/30795

Is It Time to Buy the Homebuilders? 13 Stocks to Consider

Posted on Mar 27th, 2007 with stocks: BZH, CTX, DHI, HOV, KBH, LEN, MDC, MTH
, NVR, PHM, RYL, SPF, TOL

Toro submits: We are value investors. In the short-term, we'd trade anything
- if we traded, that is. But for investment purposes, we fall soundly in
the value camp.

One of our favorite strategies is to by a basket of stocks in an industry
that has been completely blown out of the water and left for dead. Buying
small pieces in a raft of crappy Internet companies that were trading below
net cash in 2002 produced returns of 200%, 300% or even 400% over the next
12-24 months, depending on what you bought and when you did so, even though
many of the Talking Sock Puppet Companies eventually went under. I used to
execute this strategy with the semiconductor capital equipment stocks, a
group which has become absolutely @%^%$#&$@#!@?! boring, akin to watching
paint dry.

I expect a similar fate to befall the homebuilders, and I was wondering if
we were at that point yet. Steve Kim over at Salomon Smith Barney Citigroup,
amongst others, has been making the case that homebuilders bottom at 1x
book value, which is, according to Kim, where they are approaching now. If
the group is trading at a cyclical low to book value, then I am definitely
interested.

I use book value for this group because earnings estimates are meaningless
as the imploding housing market - or at least imploding in the five states
where Credit Suisse's top-notch homebuilders analyst Ivy Zelman estimates
her group generated 75% of its profits this decade - is putting severe
pressure on net income. The group, after all, was trading at 4-5x estimates
a year ago and is now something like 20x today. So price/earnings [PE] doesn
't tell me much at the moment. Also, we truly have no idea what normalized
earnings through the cycle will be as the prior top may represent the
biggest housing bubble of all time.

The following are 13 homebuilders, yesterday's closing prices and the
current price/book (PB) value.

Beazer (BZH) $32.32, 0.77x BV
Centex (CTX) $43.17, 1.05x BV
DR Horton (DHI) $22.79, 1.10x BV
Hovnanian (HOV) $27.34, 0.97x BV
KB Home (KBH) $45.99, 1.21x BV
Lennar (LEN) $44.54, 1.24x BV
MDC Holdings (MDC) $50.25, 1.05x BV
Meritage (MTH) $33.50, 0.87x BV
NVR (NVR) $712.66, 3.41x BV
Pulte (PHM) $27.25, 1.06x BV
Ryland (RYL) $45.60, 1.29x BV
Standard-Pacific (SPF) $22.34, 0.82x BV
Toll Brothers (TOL) $28.85, 1.28x BV

Average 1.24x BV

Several of those valuations look enticing, if you assume that buying the
stocks at 1x book value is a good strategy. The group is at 1.24x. If you
exclude NVR, the average homebuilder PB is 1.06x.

Back up the truck, right?

Not so fast.

First, let's look at how the group traded in 1999/2000, when everything but
TMT (tech, media and telecom), the Talking Sock Puppet companies (companies
that had little revenues, boatloads of losses, and nothing but a web site
and marketing plan), and big cap growth stocks (which, apparently, weren't
in a bubble, or so I'm told). In 1999 or 2000, the stocks bottomed at the
following valuations.

Beazer 0.60x BV
Centex 0.76x BV
DR Horton 0.79x BV
Hovnanian 0.49x BV
KB Home 1.20x BV
Lennar 1.00x BV
MDC Holdings 0.70x BV
Meritage 0.51x BV
NVR 1.08x BV
Pulte 0.60x BV
Ryland 0.57x BV
Standard-Pacific 0.64x BV
Toll Brothers 0.94x BV
Average 0.76x BV

So, in fact, if you bought the stocks at 1x book value before the bottom in
1999/2000, you lost 25% of your investment. And remember, the housing market
was healthy and about to get a whole lot healthier.

If the stocks were to revisit their lows of the turn of the decade, how much
would you lose if you bought them now?

Beazer -22%
Centex -28%
DR Horton -28%
Hovnanian -49%
KB Home -1%
Lennar -19%
MDC Holdings -33%
Meritage -41%
NVR -68%
Pulte -43%
Ryland -56%
Standard-Pacific -22%
Toll Brothers -26%
Average -33%

But this assumes that book value won't change. Ivy Zelman estimates that
there is another $6.5 billion or so in charges and write-offs coming. If
those charges occurred today, another 15% of book value would be wiped out.
What would PB for each stock be if the charge-offs were equally distributed
across the group (an unrealistic assumption, for sure, but for simplicity's
sake) and what would be the downside using 1999/2000 lows?

Beazer 0.90x BV -34%
Centex 1.24x BV -39%
DR Horton 1.29x BV -39%
Hovnanian 1.14x BV -57%
KB Home 1.42x BV -16%
Lennar 1.46x BV -31%
MDC Holdings 1.24x BV -43%
Meritage 1.02x BV -50%
NVR 4.02x BV -73%
Pulte 1.25x BV -52%
Ryland 1.51x BV -62%
Standard-Pacific 0.96x BV -33%
Toll Brothers 1.50x BV -37%
Average 1.46x BV -44%

But why look at the lows from 7-8 years ago? The housing market today far
more resembles 1990 than 2000, and my guess is that housing will eventually
fall more than in 1990/1991. So what were the homebuilders trading at when
they bottomed back then? Of the 13 homebuilders listed above, nine were
publicly traded in 1990. Here are the low PB valuations of 1991/1992, and
the losses from current levels if stocks traded to those levels after Ms.
Zelman's charges.

Centex 0.53x BV, -57%
Hovnanian 0.29x BV, -75%
KB Home 0.80x BV, -44%
Lennar 0.14x BV, -91%
MDC Holdings 0.22x BV, -82%
Pulte 0.50x BV, -60%
Ryland 0.57x BV, -62%
Standard-Pacific 0.48x BV, -50%
Toll Brothers 0.71x BV, -53%
Average 0.47x BV, -64%

Now, one can make a very cogent argument that the group will never hit 0.50x
book value - there is an ocean of liquidity in the world, the homebuilding
industry is more rational, the companies are better financed, market share
is more consolidated, land is less of a percentage of the balance sheet,
interest rates aren't as high, etc. And I certainly am willing to concede
all that. However, one should not count out the real possibility that the
group certainly could be cut in half, at least. The one thing that never
ceases to amaze me in financial markets is that markets can go a lot farther
for a lot longer - on both the upside and the downside - than one could
ever have imagined.

So, no, I do not believe the time has come to buy the homebuilders. I think
there is still significant downside to come. But that's just my opinion.

My guess is that the group will bottom higher than the 0.47x book value it
hit in 1991/1992 but lower than 0.76x it bottomed at in 1999/2000. Maybe the
group bottoms at 60%-70% of book value. If it does, I plan to close my eyes
and buy. And when they double, I'll sell because the group may move
sideways for years thereafter.

¶ 4:25 PM //

http://www.billcara.com/CS%20Mar%2012%202007%20Mortgage%20and%20Housing.pdf

¶ 4:08 PM //

http://countrywide-foreclosures.blogspot.com/

¶ 1:43 PM //

I had reservations on whether to post on here since my views are not positive, and the longs will certainly bash me as a manipulator, short in disguise or whatever other phrases used on these boards. The reason I am posting is that every once in a while these boards do add value, and at a minimum, can give you something to think about even if it is contrary to your position.Many on here seem to be excited that NFI is not tanking the way NEWC and LEND are. The simple answer is, management is completely non-communicative, and unless they are FORCED to make an announcement, they will continue to stay radio silent. If you wish to interpet this as "no news is good news" please do so at your peril. I will also issue a FULL RETRACTION if anyone can reach Investor Relations and get any questions answered, I had been a LONG holder of NFI for months (management knows me) and have now tried calling for the past 2 weeks and have never gotten a return call, a good sign that management has nothing positive to sayMore relevant is the following. The market has always perceived LEND to have the best loan portfolio among the "Big 3". LEND was "lucky" enough to sell their current Loan for Sale portfolio at 94 cents on the dollar, which should set a CEILING for NFI NEW FMT FBR and others in the space. Prior to this sale, the market rate was 97 cents on the dollar. A quick look at the blance sheets of NFI or NEWC shows you the sensitivity of each 1% discount. At 97 cents, there was marginal equity value to either company, at 95 cents, equity is worthless in both, and at 91 cents (which i assume is the best price NFI will see) the equity and preferred are worthless. Also keep in mind, that even if/when these companies do get liquidity, the cash burn rate for the next year will be tremendous (there is almost ZERO origination and these companies are no longer competitive in the market place for what business there is left) so the cash burn and book value deterioration will be tremendous.On the positive side, the company DOES have cash from 2006 that was required to pay out dividends in 2007. I suspect mgmt is being quiet since they are trying to figure out a way around distributng that cash to keep the company alive. There is no doubt that in an evironment like this, NFI cannot afford to have $200mm leave the company is the form of dividends but IRS rules force the company to pay out this money. Also, if you notice, the company no longer calls itself a REIT, another sign to me that mgmt is trying to see a way out of distributing out this $$$...My guess is that mgmt prepares a shareholder vote to either issue more shares and/or to resind the dividend for liquidity purposes, neither being a good SHORT TERM solution for equity holders. Finally, from my sources on the MI side, I can tell you that NFI DID have decent underwriting standards, and should not be lumped in with NEWC, but was probably not as good as LEND, and since LEND was first to market to sell its loans, and there are many fire-sale sellers out there and just a few SMART buyers, I do not see NFI getting more than 93 cents on the dollar for its portfolio.One freebie to end things, NEWC is a certain bankruptcy, sometimes even stocks like Enron got a final bounce before filing, but it is simply a matter of time, so if you are hanging on to any residual shares, please dont be too greedy in selling them.I hope this post provides a good lay-mens view on how we see the sub-prime debacle in the hedge world. For full disclousre, I am short NEWC, and out of LEND and NFI but will look to short or sell calls into any strength in either name.

¶ 11:54 PM //

by 华尔街大混混

之所以叫联想, 那是不能太当真的, 但又不能不认真, 要知道那个度, 难吧!

来，先喝碗水吧, 听我讲.

美股涨跌, 其实自有道理.

什么是最终的因素导致美股向上或下, 你可能讲, 那还用说, 是加息或减息, 哦耶, 你太有才了.

我又问, 那笨难看(BANANKER)今年 是加呢还是减呢? 你说那还用问, 经济不好, 当然要减了,哦耶, "你太有才了" 不过, 打四点, 错了仫啊.

为什么呢, 笨难看一定是要加息的. 为啥: 那是因为霉元($).过去霉元的确是在不断的在强势霉元的晃子下贬值, 现在要在识破晃子, 搞真的强势霉元了, 它要下自己的蛋了,让别人去说弱势吧.

强势霉元势在必行, 为啥: 美元要做公鸡中的战斗鸡, 要击溃欧元. 历来大棒+美元是美长期政策. 1. 美元不需要再贬值-很多国家特别是中国, 韩, 中东, 南美..已纷纷开始DIVERSIFICATION. 那叫好听的字眼, 其实是甩卖霉元, 这样一来, 美元霸主岌岌可危. 2. IRAN 等国胆感以欧元结算石油, 这欧元还了得. 3.美国人说美元宝贝，我疼你,不能再扁了, 国力要大空了...4. 关键的是笨难看要击败TRICHET, 击败欧元, 稳住美其向来 $+█ 政策.

原因够了吧, 那么加还得有加的手段, 不能真的把经济, 股市加跨了.

笨难看还是从老葛那里学到一招, 先来个泡沫股市, 将DOW推到13000. 14000, 等加时, 跌个千二八百的, 怕啥. 这就是FED每天平均往股市里砸几十亿的原因(YOU CAN CHECK NY FED SITE).

股市稳了, 也不能乱加呀, 总得搞点通货膨胀才行, 怎样搞才行呢, 你说, 简单, 印美钞呀! 哦耶, 你太有才了.

成功女人的背后站着一堆男人, 加息的后面站着一堆商品市场.

笨难看想, 得想办法将石油, 黄金, 基本材料价格推上去, CPI,PPI 不能处于目前水平. 这就是为什么目前石油, 黄金, 钢铁.. 等稳步向上..

这些石油, 黄金, 钢铁.. 会很快地成为笨难看加息的理由. 也很快的成为他的牺牲品. 不过, 笨难看不会立刻将它们打入地域, 否则今后加息又不充分了, 笨难看想, 哦耶, 慢慢折磨吧. 商品市场会在螺旋中上下动荡.

这是一场比任何有形的战争更加残忍的无形战争, 可以说它是二十一世纪中的美元欧元世界霸主的世纪大战, 如果美元战败, 美国将会步大不列颠王国衰落的后尘.. 如果你稍不留意, 你也便会牺牲其中.

来，再喝碗水吧,总结一下. 6.25% 是今年的加息目标. 我看以后低息的时代将要结束了. 股市会在整荡中不断新高直到崩盘.

接下来几周, 可能调整, 但之后又是疯狂上升, 没有办法呀.

一句话: 下自己的蛋,让别人去说吧, 小心站错队

¶ 3:59 PM //

Analytical Report from William Blair & Company, L.L.C.

Analytical Report from Columbine Capital

¶ 4:51 PM //

绝对精华. 股民必看
作者: op-1918

一、投机像山岳一样古老。

　　这句话我是从《股票作手回忆录》上看到的，每次读到这句我内心都为之一震，，虽然短短的一句话却道尽投机市场的百态，我仿佛看到在漫长投机长河中挣扎的人们，也包括作者投机失败后的饮弹自尽，投机游戏的本质不会变，人的本性也不会变，贪婪、恐惧、绝望、狂喜，而结局常常在开始的时候就已经注定。

　　二、人弃我取，人取我予。

　　这句话好象来自来自中国《史记·货殖列传》，《货殖列传》蕴含着丰富的中国古代私人理财思想，“人弃我取，人取我予。”被司马迁列为出奇制胜的重要策略，在证券市场里，我认为应该把“人弃我取，人取我予。”作为自己一种最基本思维方式来运用，多用这种方式去思考问题，保持对各种预言的警惕，并努力在别人贪婪的时候谨慎一些，而在别人恐惧的时候大胆一些。
　　三、买入靠信心，持有靠耐心，卖出靠决心。

　　这句话是我早期看的一本大众投资手册上看到的，那本书收集了不少格言，而经过时间的洗礼，我现在牢记的就是这句，三句话把投资中具体的投资行为的原则讲的简明、彻底、透彻，回顾自己的投资经历，几乎所有的错误也囊括在这三句话里。

　　四、只有持股才能赚大钱。

　　想在股票市场赚大钱，持有股票的本领要下苦功去学，不管你是否有水平研究指数，是否有水平选择股票，真正能使你赚到钱的真功夫就是如何持股，如何持股的道理可不像研究指数、推荐股票那样，几句话就说的明白的，短期内容易提高的，它需要长期的投资经验积累，心理素质的不断提高，使用控制风险的有效方法。

　　五、企业价值决定股票长期价格。

　　这句话是我研究价值投资理论之后的一句简单概括，经过这近十年的投资实践，我觉得要想既保持研究股票又要保持一颗平常心，自己必须要有一套对股票价格高低的判断标准，即使使用的是一些简单的判断标准也没关系，重要的是你一定要有，你对市场的价格高低的看法不能依靠是否在大资金的成本之上下，否则一味迷信大资金的力量，如果你交易的主要理由来自大资金的痕迹，你不能一边关注价格，却又不交易，你很容易陷入频繁的买入之中，因为你没有自己的股票贵*的标准，这样会使你常常去跟随那些其实跟许多散户同样愚蠢的大资金，在股票市场一般那些以价值发现价值挖掘为出发炒作的大资金才容易成功，才容易实现利润，单凭资金优势企图控制市场脱离了价值大肆炒作，最后结局不会乐观，证券市场越成熟，这点越明显。供给与需求创造价格短期波动，企业内在价值决定长期波动方向。

　　六、不要轻易预测市场。判断股价到达什么水准，比预测多久才会到达某种水准容易，.不管如何精研预测技巧，准确预测短期走势的机率很难超过60％，如果你每次都去尝试，错了就止损退出市场，不仅会损失你的金钱，更会不断损害你的信心，我觉得应该从基本面入手寻找一些有长期价格潜力的股票，结合一些技术方法适当控制风险尽量长期持住股票，而对于长期的市场走势给予一个轮廓式的评估。

　　七，股市的下跌如冬天的暴风雪是正常现象。

　　这句话是彼得林奇的《战胜华尔街》里的一句，“其实股市的下跌如冬天的暴风雪是正常现象，如果有所准备，它就不会伤害你。每次下跌都是大好机会，你可以挑选被风暴吓走的投资者放弃的廉价股票。”我觉得这句话很形象的说明了股票市场的周期性，人们在春、夏、秋、冬的轮回中不知不觉，而对股票市场的涨跌却经常感到惊讶，其实股票市场的涨跌起伏是多么的正常，只是我们的市场有时它的春天太短，冬天太长，我想这对在东北呆惯的人理解起来倒不会太难。

　　八、尽量简单

　　这句话是美国技术分析专家约翰墨菲的《股价(期货)技术分析预测学》一书中在引言中反复强调的一句话，他的意思是使用技术分析的时候“尽量简单”，我理解所谓的尽量简单就是掌握核心思想而运用之，如趋势一旦形成短期不可逆转。选股要选领涨股等。在我的实践中也常常提醒自己，尽量使自己的投资理念、投资原则简单，事情简单了也会就变得清晰了，对自己的投资行为约束也就变的有力了，不符合自己原则的事情也就容易抵制了，如阿甘一般，质朴简单的生活蕴涵着乐趣与真正的智慧。

　　九、不断的减少交易

　　这是从我的无数次错误中无数次损失的金钱中理解的一句话，巴菲特曾讲过：“钱在这里从活跃的投资者流向有耐心的投资者。许多精力旺盛的有进取心投资人财富渐渐消失。”其实不管你的理念怎样，是投机者或投资者，这句话都适用。减少你的错误就先从减少交易开始吧。

　　十、远离市场，远离人群。

　　《乌合之众》一书讲：人群中积聚的是愚蠢，不是天生的智慧。炒股的心态与你与人群的距离成反比，不要推荐股票，少去谈论股票，与市场的人群保持距离，与每日的价格波动也要尽量远点，不要让行情机搅混你本已清澈的交易理念。大学时代看过一本小册子讲如何体会孤独的快乐，我很喜欢书里观点，孤独是一种特殊的力量，如果你体会到了孤独感并且是快乐的，那么恭喜你，你的心灵是强大的。在股市这个嘈杂的市场里，是最应该自守孤独的地方。知止而后能定，定而后能静，静而后能安，安而后能虑，虑而后能得.

¶ 9:05 AM //

"Still, with just 4 out of every 10 people currently owning handsets, and projections that China will have half a billion users by the end of 2007, China Mobile has plenty of room to keep growing."

Pls keep in mind, Li-ion rechargeable battery is the "heart" of cellular phone.

Based on last CC. CBAK charges around $2.25 per battery, and in general, each cellular phone needs two batteries.

So by the end of 2007, the market for cellular phone battery in CHINA alone is around $2.25B.

There is a lot of room for CBAK to gain market share.

BTW, sooner or later, $35 per cellular phone will help low income Chinese peasant buy one.


-----------------------------------------------------------------------------------


By 2006, color display phone has dominated the market. Along with frequent appearance of camera phone and multimedia phone, functions of photo shooting, receiving and sending multimedia messages, and downloading high-capacity games are used more and more often. However, in facing with more powerful 3G mobile phones, battery capacity is obviously insufficient. Mobile phone battery tends to be lighter, thinner and higher capacity. Various new battery types such as fuel cell, Zinc-air and solar cell are under the R & D process.

Regarding LIP, there are around ten competent manufacturers, among which the major foreign manufacturers are Sony, Samsung and LG, while that of China are TCL and ATL.

As we all know, China has abundant and cheap labor force. Therefore, many Chinese manufacturers adopt low-cost competitive strategy by using labor-oriented semi-automatic production lines. The build cost of a single Li-ion full-automatic production line in Japan is several times or even dozens of times of that in China. Currently, some Chinese Li-ion manufacturers have caught up with the counterparts in Korea and Japan, for example, BYD and Lishen rank top five and top ten respectively on production capabilities worldwide.

From the year of 2003 to 2006, the CAGR of the global Li-ion battery production scale will reach 23.2%, and the CAGR of sales revenue will reach 12.25%. From the year of 2007 to 2010, Li-ion battery industry will gradually enter into a steady growing period. According to us, the CAGR of production scale and the CAGR of sales revenue will be 9.85% and 5.85% respectively by then. In a word, mobile phone battery market is not only a potential huge market, but an effective and sustainable market.

The sales revenue of Li-ion battery has exceeded that of Ni-Cd and NI-MH Battery. With the market shrinking of Ni-Cd and NI-MH Battery, the popularities of consumer electronic products and mobile electronic products such as mobile phone, digital camera, PDA and camcorder etc, as well as the huge application potentials of Li-ion battery, the market demand of Li-ion will increase with a relatively rapid growth rate in the future.

SOURCE: Research and Markets


NEW YORK (AFX) - China BAK Battery Inc., which makes laptop and electronic device batteries, said Wednesday it plans to build a new factory to develop and make a new line of advanced lithium ion batteries. The Shenzhen, China-based company said the factory will be owned and operated by its BAK International (Tianjin) Co. unit and located in the Tianjin Beichen Hi-Tech Industrial Park, where private companies can receive state incentives such as tax brea ks. China BAK plans to have product shipped from the factory by fiscal 2008 at the earliest. The new batteries are intended to supply higher energy density and power, longer life and shorter charge times compared with other lithium-based batteries. Initially, the company will focus development of the new batteries to be used for uninterrupted power supplies and in light electric vehicles such as electric bicycles. China BAK shares rose 2 cents to $6.05 in morning trading on the Nasdaq.

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