Betting against the big picture on housing

Don't miss this piece in today's Thestreet.com on housing. It basically summarises the same arguments I have made in my series of posts about housing. There is a time to be bullish and there is a time to be bearish on a sector. Passing off mindless bearishness as analysis is a recipe to disaster. As a trader you should think differently from analyst and newsletter writer. Analysts who are coveted by medias like CNBC, Reuters, Business Week, CBS,WSJ, Bloomberg are always a good bet to find contrarian ideas , because media always chooses people based on what people want to hear. They represent what millions want to hear.

Dogged Homebuilders Dig In

The bad news for home builders keeps piling up, with Friday's warning from Lennar (LEN - news - Cramer's Take) the latest in a long string of disappointments.

But since bottoming in mid-July, homebuilder stocks are up over 10% amid the torrent of bad housing news. This very well could be a sign that the sector's tide is finally turning after a sickening slide that has taken the builders' stocks down about 50% from a year ago.

Just look at how the market this week shrugged off earnings guidance cuts from KB Home (KBH - news - Cramer's Take) and Beazer (BZH - news - Cramer's Take) and Hovnanian's (HOV - news - Cramer's Take) big year-over-year earnings decline and sharp drop in new orders.

Some very smart people are eyeing the homebuilders.

With the stocks trading at depressed multiples and only slightly above book value, a lot of smart investors have already pounced, including Bill Miller at Legg Mason.

The latest rumor flying around hedge fund circles is that Ed Lampert, the wonder boy manager at ESL Investments who turned around Sears (SHLD - news - Cramer's Take), is now eyeing an entry into homebuilder stocks. Lampert, through a representative, declined to comment.

Note: You can read more about it here, here, here, here, here, here, and here.
Above all read this before you follow any analyst.

The original contrarian call on 24 th August.

The overcrowded short trade in the housing stocks



When everybody gets it, best part of the move may be over. What do you see day after day, a negative story on housing. Today all the leading newspapers have negative stories about housing on front page. Expect a magazine cover this weekend or next on housing crash.
So time to cover your housing stock short. It might be time to buy housing stocks if you are value investor. I am buying CHCI,Comstock Homebuilding Comp

Housing Stocks
AVTR,Avatar Holdings Inc
AXR,Amrep Corp
BHS,Brookfield Homes
BZH,Beazer Homes Usa
CHCI,Comstock Homebuilding Comp
CTX,Centex Corp
DHI,D.R. Horton Inc
DHOM,Dominion Homes Inc
HOV,Hovnanian Enterprises A
ITB,iShares Dow Jones US Home Construction Index Fund ETF
KBH,Kb Home
LEN,Lennar Corp Cl A
LEN.B,Lennar Corp Cl B
LR,Lafarge Sa Adr
MDC,M.D.C Holdings Inc
MG631,Residential Construction
MHO,M/i Homes Inc
MTH,Meritage Homes Corp
NVR,Nvr Inc
OHB,Orleans Homebuilders Inc
PHM,Pulte Homes Inc
RYL,Ryland Group Inc. The
SPF,Standard Pacific Corp
TARR,Tarragon Corp
TOA,Technical Olympic Usa Inc
TOL,Toll Brothers Inc
WCI,Wci Communities
WLT,Walter Industries Inc