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Strategies & Market Trends : Value Investing

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To: jeffbas who wrote (9329)	12/16/1999 9:07:00 PM
From: James Clarke	Read Replies (1) of 78523

re: CTX <<I would tend to prefer this to CMH as its industry is suffering less.>> I the words of our great president Bill Clinton, "it depends what the meaning of the word is is". Clearly the market is anticipating that CTX is about to suffer some pain, with interest rates rising. Can homebuilding get any better? Clayton's economics are very different from Centex's. 50% of their income is recurring, whatever the environment. Clayton is not recession proof, but it suffers a lot less than a Centex unless I'm missing something big. Both may be great investments, but if I have to pick one there is no question what that would be. What did Centex do in the last recession might be a good place to start. You might also look at what Clayton did in the last recession. I think you'll see a difference. If you want to compare the valuations, I would suggest you use mid-cycle earnings power, not trailing earnings which might very well be the peak for both. But the mid-cycle adjustment for Clayton is much less drastic than the adjustment for Centex. Maybe the answer is none of the above. Time will tell.

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