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
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
Regular readers of the blog know how the bears responded to that call.
4 comments:
when will the housing long be played out? as you mentioned, it was a while back when the whole world was down on housing - but it never went down...
sooner or later, bulls will have to take profits - what would you look for?
you dont think its too late to get in on the long side?
In my understanding of the market there are basically three types of investors growth, clueless and value. Each one has a different perspective and time horizon. The homebuilders are shifting hands, the value funds are buying them. They hold it for long time. There is huge amount of capital invested in value strategy.
The other thing is there will be private equity groups willing to buy out homebuilders if they go down further. Warren Buffets kind of investors would step in to buy them if they go down further. So essentialy the value types will put a ceiling on any down ward moves.
So the home builders will probably spend 2-3 years stuck in range around these price levels.
Some of them will go down. Some will be bought, some will merge.
The clueless are the shorts who think homebilders are like dot com companies. Some are still short. With all due respect to Doug Kass, he has pounded the table on housing stocks short for third time. Previous two times he did it, the stocks went up. Selecting shorts is never an easy task even for the pros.
There might be a short trade possibly developing in some of them as some will probably revisit the bottom of the range.
Frankly I think there are better risk reward shorts than homebuilders in this market. But thats just my opnion.
agree - why short them now? the big gains to be had are gone...
thanks - shorting comes easier to me, so i look for shorts regardless of the overall market... that being said, i need to be reminded, from time to time, about the market mechanisms like value investing, etc.
In my experience so far, to pick good shorts , you have to pick the sweet spot between growth and value.
Growth stocks sour and the growth crowd starts dumping them. The value crowd waits for it to reach their target valuation zone as they want to buy dollars worth of assets for few pennies. There is significantly higher asset alocation to value than growth.
The growth crowd chases the new , new thing while the value guys believing in holding for eternity.Growth crowd looks at 52 week high, value crowd looks at 52 week low as buying opportunity.
Easy money on short side is made shorting when you can catch some part of this transition.
But like in long it ultimately boils down to equity selection. Rest is all tactics..
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