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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling
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To: Michail Shadkin who wrote (328)5/8/2001 8:09:16 AM
From: Bruce Brown  Read Replies (1) of 6873
 
Michail,

First post here as I followed the link from SI home page.

I read the past 100 or so posts and enjoyed what I was reading. I have one question concerning your short on BZH. You made some comments about shorting POS pigs and what not, but I was curious what it was about the valuation both on a trailing basis as well as the estimated EPS for the full year based on the historic backlog the home builders are seeing. When the market is confident with the home builders visibility, trailing PE's have been known to average in the 15 range. The group average trailing PE multiple is now in the single digits (where they have been for quite some time), so even if we factor in some of the unknowns such as how long can the housing market stay supple and the debt issues of some of these home builders, with their EPS growth last year and forecast for this year - how do you see it as being too overvalued? Maybe I'm missing something, but the group's EPS growth was 23% in Q1, 25% last year and should come in around the 23 - 25% range for this full fiscal year. Not bad for a single digit PE group that is having much better earnings growth than the S&P. Is it because you see it as too late in the stage for any more share price appreciation?

Thanks, I appreciate your thoughts. I tried to dig around to see if you posted your reasons for shorting BZH, but didn't have any success at finding the original post. Sorry to make you repeat what you probably have already said.

BB
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