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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: jeffbas who wrote (9345)	12/17/1999 1:03:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78520

<<Next, if you look at Value Line, the average annual P/E for CTX is nearly double current levels over a long stretch of years.> [as compared with CMH] Careful - think about what this means before you start making investment decisions based on it. A lot of those CTX P/E ratios were on depressed "E". CTX's "E" may be about as big as it is going to get in this cycle. Clayton has never had depressed "E" in that time period, and I think there is a moderately high probability they won't have it this time either. We've done the CTX/CMH debate - my point here is on low P/E analysis. When you are comparing a cyclical against a grower, you have to be careful what you are comparing. Are we comparing CTX's P/E on its earnings BASED ON AN AVERAGE MARGIN OVER THE LAST TEN YEARS vs. a similar ratio for Clayton? Maybe we should. At the same time, NOBODY WANTS TO OWN HOUSING STOCKS AT ALL. Clayton may be the chickens..t pick in the sector - I am not even trying to play the cycle - I've owned the stock for three years and have added a little here and there during this trough, and I intend to own it for a lot longer. You may be right, the real money may be made in the highly leveraged housing stocks, but that's not the game I'm playing. I know Clayton very well. I don't know CTX and TOL and the other stickbuilders nearly as well. And as long as Clayton is at 9 and change, I see no reason to spend much time learning them because I can't imagine they'd be a better investment than what I have the opportunity to buy more of. What I do know about stickbuilders: 1) When they're all down, buy Crossmann at book value. Its there now. 2) Be very careful about debt levels 3) Understand land assets. In a recession the land may be worth half or less what it is on the books for if they purchased it recently.