(especially Alex and Kamikazieee)
I am considering buying BZH. From a fundamental analysis standpoint, the story looks compelling. Very high earnings, looking to go even higher next year. If this company can deliver $10 a share per year for many years to come, the stock price will soar to reflect this tremendous value. $60-$80 will seem like a steal at that point. There is no question that IF earnings are strong, the stock is very underpriced.
The short case is also compelling. Home prices and demand for homes can't go up forever. There is something of a housing bubble, perhaps a giant one. The economy is soft. The perception is that homes are overbuilt, consumers are overindebted, interest rates are artificially low. If the economic recovery really turns bad, this company could be sunk. Their business is reliant on contracting, building, and delivering new homes. If consumers can't afford to buy, they don't have a market. Also, technically speaking, selling begets selling. As people worry about whether this company will deliver in the future, they panic and sell the stock now, driving the price down further.
LONGS: Give compelling reasons how and why this company will continue to deliver $10+ a share in earnings. Say that 2002 is a given that they hit their numbers. Will they be able to continue to build and sell a lot of houses in 2003, 2004 and beyond?
SHORTS: Give a probabilistic analysis of why this company will not be able to earn what they claim they will. Is management dishonest/lying? Are they being overly optimistic about their growth? Justify your responses, do not simply assert "The chart says..." or that "we are on the wrong end of a cycle." Back up your statements.
Thank you all in advance.
BZH bullish case (since you asked me):
- Earnings, low PE, strong and growing.
- Low PE relative to other homebuilders as well.
- "Right" type of housing for current market, entry level.
- Interest rates low for as long as economy is sluggish. Once economy picks up, so do interest rates, but so also does spendable income. Win either way.
- Homes built where they are needed. One myth perpetuated by the short sellers is that demand is weak in certain areas of the USA. That doesn't account for the fact that as some areas of the US are weak, others are strong. A home can't be moved from a "bust" area to a "boom" one, so new houses must be built. They only build in "boom" areas.
- Large public homebuilders grabbing market share. Much of the growth of the major homebuiders is a market share story. The large public homebuilders have gone from a 10% market share of new homes in 1990, to a 20% share today. Many feel that can rise to 50%. The losers are the "mom and pop" builders.
- Home prices were virtually stagnant from 1988-1998. The short sellers look at the increase in home prices of the last 3 years and think it's a "bubble". Actually home prices were just "catching up"; the annualized increase in home prices from 1988-2002 isn't overly strong. These prices are here to stay, IMO.
- Huge short seller position in BZH, bodes well for the longs. Short sellers are mostly chartists and fear mongers. Kamikazieee is a good example of both. He "warned" that BZH would go to $40/share in October, it didn't. He "warned" that BZH would go to $51 last week, it didn't. He also has his "facts" totally wrong about the homebuilders. He claimed that "no homebuilder, including BZH, had 15% annualized EPS growth over the past 10 years". He didn't even bother to look it up, before he posted that. Fact is, most large homebuilders had at least that number, and BZH had 20% annualized EPS growth over the past 10 years. I don't trust Kamikazieee, or any of the other shorts. They post here way too much, what does that tell you?
- As long as BZH keeps making its numbers, the stock will go higher over time, MUCH higher. Short term, who knows? That's why no one should buy BZH on margin, or buy options - but that's true with any stock. If you believe in BZH, own the common shares IN CASH - not margin. That way if the price falls before it rises, you won't face a margin call. It also limits the shares that are available to the shorts, to borrow for shorting.
- BZH shares now in very strong hands, due to the price gyrations it has had. Leaving people like myself, Wayne, Stefaith, etc. who are only motivated to buy more shares if the price falls, rather than being motivated to sell. My shares are not for sale at anywhere near this price, or lower. You're looking at some VERY strong hands, that should ultimately lead to a much higher price. The shorts here I believe are very skittish, very short term, very "weak" shorters, IMO.
- As a contrary indicator, consider the fact that there are FAR more posts here from the short sellers than the longs. That should tell you something. If there's one sure way to "predict" the direction of stocks, its to determine the "sentiment" and then do the opposite.
-Realize that these are shares in a business, not baseball cards. If you can determine the true value of the business, and buy it for less, then eventually you should make a nice profit. The shorts will try to dissuade you from that belief, they want you to play their game, sorry but I won't play that game. The chartists can trade with each other all they want, but they will only be able to sell me shares low, and buy them from me high (and for a generous profit to myself) - otherwise I'm not trading with them. And these creeps bore me, so don't expect to see me here all that much; but be sure I'll be holding, and buying more at lower levels (if we should
Read the last 1,000 messages, look at three sets of charts, dailies, then 60 minutes and finally the weeklies. See if you can identify the trend. If you can, and you think it's down, then you know what to do. If you think this stock is bottoming and it's a buy, may I suggest a career in insurance sales.
If you can't come to a conclusion, go to a different sector.
The only reason to go long this stock here is a misguided belief system. The only reason to go short (a smallish managed position) is to make money by covering within 5-10 trading days.
reason to go short (a smallish managed position) is to make money by covering within
5-10 trading days.>>>
I am not sure about that, either. I expect to cover this week at the 52.1 level (thinking it will hit 51.50 or so, but possibly find round number support). On a longer term basis, however, the stock has a lot of room on the downside. The building cycle can last for several years, and we are just barely past its peak. And the chart certainly looks VERY WEAK for a LONG TIME. That said, a bounce off approx. the old low (51~), to approx. 60, can be part of the larger RightShoulder, which promises stunningly low numbers over the next couple years if it forms completely. So I expect to cover only for a big bounce. I would definitely avoid the long side, even for a potential pullback to 60, because its a big top, and as Stan Weinstein says, "The bigger the top, the bigger the drop."
ALSO: As I correctly called at 3:30, in the midst of the commercial-interrupted pop, the stock closed near its low. THE FACT THAT A POSITIVE GUIDANCE FOR A SECTOR MEMBER CANNOT HELP THE STOCK UP SHOULD BE TELLING.
All we gotta do is break 58 tomorrow on a closing basis...
Yes, you gave me good advice on the HI board. I was long, thought I knew what I was doing. Partially on your advice, I sold my long position, shorted, made more, covered. Then I got the heck away from that stock. Too unpredictable. In retrospect I should have stayed short but then with the buyout it rose above where I covered anyway.
I owe you a steak dinner kamikazieee. And I respect your opinion that you gave here on BZH. But I thought HI's fundamental picture looked a lot more rotten than BZH.
I am a technician. All the news in the world only fits into my charts.
On Wed. the Starts #s will be issued, as well as the Permit#s for last month. IF that falls, then you KNOW that sales will be falling at least for a few months.
You would be insane to buy this stock in the current weakness. Period. AT LEAST WAIT FOR 52.
It will be there THIS WEEK. WAIT FOR 52. WAIT FOR 52. WAIT FOR 52. You get more shares for the same amt of $$$. Co. doesn't pay a div. WAIT FOR 52. THAT'S AN WASY THING TO DO. I will probably cover at about there for a tradable rally. NOTE: I WILL NOT BUY THE STOCK FOR THE EXPECTED RALLY, but will wait for a pullback to about here for a re-entry.
WAIT FOR 52. Do NOT catch the falling knife.