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  • hedgefundscience hedgefundscience Dec 6, 2012 6:31 PM Flag

    I do the opposite

    Everyone says to short home equities, and the trend is down, so I bought calls. I'm sticking my neck out here, but earnings are on December 17th, so we'll see if my obstinance works!

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    • To anyone who would like to hope for a repeat performance (like KBH) for next year, look at builders and banks in emerging market countries, like GFA, and leveraged bull country funds (LBJ ?). I think 2012 will prove to be the valuation lows for emerging economies.

    • Make that December 20th - per the company's announcement.

      After the Playa Vista, Converse and Katy purchases in the last month - in addition to all the previous land locked up for 2013 in 2011-12 - any "bad news" should be the best news for the bulls. Simply add more KB at every sell-off.

      I checked the employment figures this morning for CA for the last year. Nice net increases in adult populations in San Bernardino, Riverside, Santa Clara, SF Bay Area, LA - the geographic areas that KB focuses on. Credit Suisse's monthly survey of real estate agents says a nice story: very little quality inventory out there; nobody wants a fixer-upper at premium prices in today's busy world; NEW construction at new green standards is preferred, especially by younger buyers who don't think spending their weekends at Home Depot is the best use of their time.

      In an appreciating real estate market, you buy the best quality house, the biggest house you can afford, in the best neighborhoods, and hang on. Time becomes your ally, not your enemy (the exact opposite of the Great Recession metrics). By the time prospective buyers wake up to this, it will be too late for them. Spring 2013 is probably the last best chance before the next long wait for the real estate cycle to run its course. The bears will say "No, no, not so" but KB will continue to say "Yes" as it climbs to $20. After that, there'll be decisions to make, but not now. I've been in this since $6.50 and I see no reason to change my mind now.

      BTW...check out KB's new best friend - tiny Brookfield Residential Properties (BRP). If these two companies team up to dominate CA in joint ventures together, they will give Toll and Lennar a run for their big-bucks money.

      • 1 Reply to abcs.learning
      • KBh, BRP, GFA- couldn't be happier. Got a late start on January 1st. Doubled my money by March (100%), lost it all (-50%) by June. Kept adding adding and adding - every month. Now up 135% for the year on invested capital.

        I think it is still the early innings of this game. I have studied every square inch of this sector, and feel confident that my reading of the industry and the economy indicates we're in the 3rd inning of this recovery. By mid-2013 that should become clear. I think KB will be in the $20s by then. All the other builders are at pre-recession highs. Why not them? If KB announces a secondary, don't freak out. Buy it. Their short interest has receded 16% in the last 8 weeks. I expect more deletion of the same in the weeks ahead.

        GTLA. Invest. Don't trade. In the long run you'll always make out better. Took me years to get this, but I think I finally have.

    • Bought: KBH_122212C14 at $0.67 on 12/05/2012.
      Sold: KBH_122212C14 at $1.70 on 12/14/2012.

      A little contrarian spending money!

 
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