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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: John Vosilla who wrote (46835)1/10/2006 11:21:12 AM
From: orkriousRead Replies (2) of 306849
 
Robert Marcin
Home Building Trade Just Getting Started
1/10/2006 10:46 AM EST
The "soft-landing" trade in the home builders is just beginning. Another major builder, DR Horton, announced solid fundamentals with strong revenues, profits and orders.

Man, did I take grief when I put this trade on, from Cramer (since retracted) to Kass, and every commentator in between!. Everybody knew the housing market would implode and the stocks would plunge. Once again, the consensus was wrong.

As the large national builders report strong results in a flat housing market, the shares should rally big time. They should at least get to the p/e ratios of steel stocks, 10 times earnings. I am still kicking myself for missing that group! Take a look at those stocks! Home builders will look like those charts in the next few months.

With no more housing bubble and a friendly Fed, the stocks have nothing to hold them back. And, they should respond very positively to the upcoming earnings reports.

The lesson here is not in the trade itself. Things could have gone differently. It's in the analysis and logic of the bet, something the bears did not get. Note that for future reference.

Position: long home builders
thestreet.com
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