<<<Subj: Re: Excellent write up on KBH By: jcob4 Date: 07/25/05 01:29 pm
Mr Market obviously has never heard of a balance sheet, nor a cash flow statement, or doesn't know how to read them. Because if he did he would have mentioned that KB has long term debt of $2,380,882,000.00, cash & equivlents of only $106,114,000.00, and were negative cash flow last quarter in the amount of $56,834,000.00.>>>
Actually, $$$MR. MARKET$$$, with his Wharton MBA is quite familiar with many different types of balance sheets. If you look a little more closely at KBH, you'll see that the cash draw down was the result of some very significant land purchases at very reasonable prices.
By now, the appreciation of this land value has probably already eclipsed the debt service expense.
Look at the interest rates of the Long term debt very very low (6 to 7%)...in the mean time, KBH is hitting a Return on Equity of 26%. That's quite an admirable spread..it translates into a money machine.
At the end of the day, going against $$$MR. MARKET$$$ may not be profitable, as he has 70 consecutive profitable trades of 15% or better. He truly is HUGE!