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Strategies & Market Trends : Value Investing
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To: Kapusta Kid who wrote (11860)1/16/2001 1:32:13 AM
From: James Clarke  Read Replies (3) of 78618
 
I would urge extreme caution on homebuilders. The economy is slowing if not stopping and these stocks are at their highs. Other consumer cyclical industries are, to say the least, not at their highs (cars - look at a chart of F and why is that so different from homebuilders?)

Those P/E's are based on trailing earnings, and in my opinion the forward estimates may be very optimistic. Wall Street analysts are very high on these stocks - you want to buy homebuilders when Wall Street hates them.

This is a sector that will look the cheapest on P/E ratios, (and especially the inane PE/growth formula - NEVER use that on a cyclical industry) just before earnings collapse.

I've been wrong before. And I've been right a few times too. Do your own homework. Just don't use PE/G ratios on cyclicals.
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