"I have to go with my analysis that this sector moves in unison and that the future on july 28th of 2005 looked alot better for BZH when it topped out at its previous high of &66 than it does on november 18th 2005. Housing starts are down,inventories are up,morgages are higher and going higher, three more rate hikes are on the way, and prices will come down as material costs go up."
tool, never thought of it that way. I'm amazed that BZH has held up so nicely with all of the negative news. I didn't think it could possibly break the all time highs. You're right, a break of the all time highs assumes that these are the best of times for BZH. It is not.
I'm short TOL and there's been many times when it goes up when I felt like covering. The up and down swings are pretty high for my tolerance, but the case for a slow down in housing is pretty strong. The only way I can calm myself down is to think long term and imagine whether next year the stock price of the housing builders will be up or down? Will houses sell for more or less next year? If the answer is down, then no need to bail out, just keep the course. Psychology is changing in the market and looking at some of the inventory increases, it looks like everybody is starting to stampede into the exits.
Existing home sales come out 11/28/05 (Monday after Thanksgiving) and new home sales the day after that. I am looking forward to it. From all of the news that I read, it should be a good one for the shorts.
BZH now has the highest P/E of the major home builders. This industry is tied to one another, If the real estate market continues to decline it is unlikely that BZH can matain the same revenues as 2004-2005. The E will evaporate and the P will follow. I think what alot of people do not understand is that THis is a head fake,nothing more but psychological warfare on short interest. What exactly has changed in the housing market in the last two weeks. Housing starts are down 6.8 percent thats the only news besides Toll guiding estimate down. Stocks do not rally on bad news unless there are ulterior motives. BZH does not have the cash to buy back 10 million shares of this stock. Total cash is 8.1 million thats enough to buy 117,000 shares at this price of 69. Total debt is 1.25 billion dollars. And profit margins are a pathetic 5.26 percent. This is the latest tactic of the buildes to prop up there share prices. Tendered offers as performed by BHS. And share buybacks ie.. BHS. If a company can find no better way to invest its cash in the company than to buy its own stock instead of investing it with an objective to increasing revenues, increase revenues and the stock price will take care of itself. Thats how you know, they know revenues are falling into the future. They knew if they could just move this up there would be massive short covering because of the high short interest. This is a 4th quarter prop job to satisfy the money managers. This bull rally is engineered by computer programed trades, They will take high enough to get all on board, Then they will sink the ship with all hands on deck right after the new year. Look at the DOW 2 year chart and see what happened to the last 4q rally after jan 1st. Ask youself one question, What is a strong enough catalyst to drive the market higher after DEC 31.
Nothing has changed the last couple of weeks. In fact every day it seems like there are more and more people starting to acknowledge that we have reached our peak in the third quarter. I think that David Lereah (president of National Association of Realtors) said that. All of the data coming in everyday supports the decline of housing. I'm looking forward to 11/28 for the existing housing sales data.
Somebody in this board had suggested that they announced the buyback to support their estimate of earnings for next year. The same day that they have announced that they intend to purchase more shares next year, they reiterated that they are keeping their estimates for next year constant. Shouldn't it go up if you are retiring shares?
It seems like the longs have the perfect opportunity to unload here. They have been given a second chance before the stock price drops again. What would be a good analogy to this... It's like a Phoenix homeowner being able to sell his house with the conditions like last spring.
If somebody was to offer me to buy their house right now for the same price as in the spring, I would tell him to take a hike. Those days are over. Same thing with this stock.