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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Amigo Mike who wrote (4488)	5/8/1998 6:14:00 AM
From: LTK007	Read Replies (1) \| Respond to of 29382

More on DHI and their sector---Forgive my preoccupation with this,but as I am rather large in DHI,I am a bit tunnel visioned--but this is good stuff,not just DHI but others in this sector--- Message 333 of 333 Reply DHI Dow Wire nukecl1 May 8 1998 5:48AM EDT Dow Jones Newswires -- May 4, 1998 Merrill Lynch Sees Lower Interest Rates For Building Stks By Janet Morrissey NEW YORK (Dow Jones)--Despite concerns that the Federal Reserve may raise interest rates, Merrill Lynch & Co. analyst Jonathan Goldfarb issued a bullish report that predicted the building industry will benefit from a slowing economy, subdued inflation and lower interest rates later this year. Most building materials companies and homebuilders, whose earnings are tightly linked to the economy and interest rates, took a hit last Monday on news the Fed might boost rates. At its March 31 meeting, Fed policy makers agreed that a rate hike is more likely than a decline. Investors responded harshly, making the Dow Jones index for home construction companies the biggest loser of the major indexes on April 27. But Goldfarb noted that most building stocks have recovered in recent sessions and that interest rates remain "far below the levels that would start to constrain activity." "The elements that cause cyclical peaks are, still, nowhere in sight," he said. While he acknowledged the sensitivity of the market to interest rates, he said, "we would be much less bullish toward building stocks if we felt a sustained increase in rates was probable." Instead, the Merrill Lynch analyst is predicting economic growth will slow to a rate of less than 3% for the remainder of 1998, that inflation will be "nearly imperceptible" and that interest rates will actually fall below present levels. Goldfarb said interest rates would have to surge more than one full percentage point before demand would be seriously hampered. He said the building industry is reaping the benefits of a robust building climate, and he predicted that this "Goldilocks" environment will continue through 1998 and 1999. The analyst said his earnings projections for 1998 may be on the "conservative side," as he predicts both building materials companies and homebuilders will post higher results than either investors or management projected. Goldfarb is especially bullish on Armstrong World Industries Inc. (ACK), Masco Corp. (MAS) and USG Corp. (USG), on the building materials side, and Lennar Corp. (LEN), Kaufman & Broad Home Corp. (KBH) and D.R. Horton Inc. (DHI), in the homebuilding segment. The Dow Jones Home Construction index rose 1.6% to 1045.19 Monday, while the Building Materials index see-sawed before closing down 0.3% to 1068.5. -Janet Morrissey; 201-938-2118 DHI: Quote \| Profile \| Research