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

To: pcyhuang who wrote (24592)	8/15/2006 9:51:55 AM
From: Madharry	Read Replies (3) \| Respond to of 78753

arent these the guys that build and sell condo towers in florida? gutsy call. I added Dell today. Longleaf partners among others made a huge bet on them , over 9% of their portfolio as of 6/30/06. also i would have expected stock to open down today after battery recall instead its up perhaps signifying the last of the sellers.

To: pcyhuang who wrote (24592)	8/15/2006 10:17:28 AM
From: gcrispin	Respond to of 78753

WCI: Short interest still increasing as of July 14.

To: pcyhuang who wrote (24592)	8/15/2006 10:12:44 PM
From: Julius Wong	Read Replies (1) \| Respond to of 78753

Analyst upgrade boosts WCI Communities By John Spence, MarketWatch BOSTON (MarketWatch) -- WCI Communities Inc. led home-builder stocks higher Tuesday, gaining ground after a brokerage upgraded the company's stock from market underperform to outperform based on valuation. Last week, shares of Bonita Springs, Fla.-based WCI fell sharply after the builder of luxury homes and towers in Florida posted a 70% drop in its quarterly profit and also lowered its 2006 earnings outlook. "It appears speculative demand has disappeared, real buyers are 'on hold,' and people in backlog continue to cancel homes, believing it is better to lose their deposit than close on a unit and incur indefinite carrying costs," analyst Alex Barron of JMP Securities wrote. "We do not believe these conditions are likely to change anytime soon given the sharp rise in the number of resale listings in the Florida market," Barron wrote. The analyst also expects the default rate on WCI's towers to increase now that it has lowered deposit requirements on new sales from about 20% to 10%. Yet the upgrade is based on valuation -- the stock was down 48% in the year to date through Monday's close -- with many investors apparently betting the company will go into bankruptcy. Barron noted WCI has put in place several initiatives, "such as dramatically lowering the number of new towers it launches, and implementing cost-cutting measures, which may imply some degree of earnings loss in the next few years but should ensure solvency, assuming the level of defaults remains manageable, in our view, below 50%." Shares of WCI gained 93 cents, or 6.7%, to finish trading at $14.80. WCI in June also increased its unsecured revolving-credit facility to $900 million with an "accordion" feature permitting increases up to $1.5 billion. "We believe this borrowing capacity should be sufficient to weather a severe downturn in its condo business, such as the one we envision," JMP said. Along with the ratings upgrade, JMP cut its 2006 earnings estimate for WCI to $2.40 a share, down from $3.40 a share previously, on lower units and margins. JMP also lowered its 2007 forecast to a loss of 75 cents a share from profit of $1 a share. "We will continue to monitor the level of resale listing and believe the number of defaults will be the key metric to watch over the next few quarters," Barron said. Builder confidence plummets The home-builder stocks got a lift on Tuesday from Wall Street's somewhat eased inflation fears, even after an industry survey showed confidence in August fell to the lowest level in 15 years. August was the seventh straight month of deteriorating builder confidence, the National Association of Home Builders reported. "Two factors are coloring builders' perceptions of the market right now -- rising sales cancellations and substantial growth in inventories of both new and existing homes," said David Seiders, chief economist for the industry group. "These factors are largely the result of an increasing number of potential buyers adopting a 'wait and see' attitude because of uncertainty about where the housing market is headed," Seiders said. Additionally, speculators are exiting markets, which is compounding the inventory upsurge, he added. See Economic Report. So far in 2006 through Monday, the Dow Jones U.S. Home Construction Index was off about 38%. marketwatch.com