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Meritage Homes Corporation Message Board

  • Whipped_34 Whipped_34 May 25, 1999 12:28 PM Flag

    Stock price

    This company does a good job building houses and
    seems to have a nice profit margin.......but this stock
    is a DOG! 12 1/8 with a PE around 4. The only chance
    I see for a run in this stock is for someone to buy
    them. Good luck longs.....I'm afraid we'll all need it.

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    • Well the major markets are down pretty hard today
      and MTH keeps going up. The steady ride up is
      impressive and hope it continues for awhile until the next
      earnings report at which time good news will hopefully
      make it take off. Good luck to all.

    • <<Bottom line, there is no evidence
      whatsoever of a slowdown, that is a myth that has taken on
      huge
      porportions thanks to the media and East Coast
      analysts who generally haven't a clue and still are living
      in
      the 70's! They are all worried about "what if's".
      Well, I say, What if Grandma had balls, then she would
      be
      Grandpa. They have their minds made up, never
      mind the facts! >>

      Maybe but then I live
      in S. California during the early 90's when people
      thought the housing market was never going to come down
      and then came down about 30%. Maybe at that time its
      best to assume S. CA was in the 70's and not in the
      90's but it was not a pretty sight to see and it made
      Orange County go bankrupt (luckily I bought a house at
      that time). Even, now with the strong housing market,
      many have not regained the loss that they saw during
      the early 90's (sorry early 70's). Now as you say,
      one of the indicators is a hot Pacific coast market
      which has dramatically gone up once more. The situation
      does not dictate that the market will repeat itself,
      but I would not put a blind eye to the
      situation.

      I agree with you that the housing industry is
      outrageously low, which is why I am invested in this industry.
      I also feel that with the article in Fortune, the
      market is finally recognizing this low valuation. I
      think this is one reason for a recent turnaround in
      many housing stocks (IMO). However, as you say, this
      is the market that takes many internet stocks to
      stupid valuation (P/Sales of over 10, P/Book of over
      100, and forget PE since there is no earnings) while
      keeping this industry at single digit industry. I think
      the fundamentals of the stocks are sound. However, it
      is not the stocks I am worried about but the fickle
      market's weird response to stock trends (or I should say
      fad). You may say, 'how can the market ever be so
      stupid to take the industry lower'. On the other hand,
      many already say 'how can the market be so stupid as
      to have taken this industry so low during such a hot
      housing market'.

      Maybe a "it is at a historic
      high and so one should keep an eye" is nearsighted but
      so is "how can this housing market boom ever end"
      sort of response. Right now the housing stocks look
      very attractive because of strong industry growth/very
      low valuation, and a recent turnaround in stock price
      trend. These are the reasons I am in NHCH and
      considering this one. However, I will never assume "alls
      well" and stop considering how situations may change in
      the future.

    • <<The evidence clearly shows that the
      cyclical slowdowns have far less
      impact on the
      builders bottom line than they did when this notion became
      ingrained in the heads of the spin
      doctors who have
      convinced most everyone that nothing has changed since the
      70's, when in fact it has.>>

      Wow you seem
      to have a bug up your butt about anything mentioned
      as cyclical. It is good to hear that the cycles are
      being improved and I cannot imagine that the industry
      would not try to make things better. As you say in your
      message, orders are taken, backlog is built THEN the homes
      are built to order, and I said I will be keeping an
      eye on the backlog to see how this cycle is doing. It
      seems we are agreeing over this issue. I never said the
      cycle is the same as in the past but just stated that
      the industry is still cyclical. If the chart shows a
      complete elimination of any cyclical nature then that is
      great, if not that is something still of a worry.


      You also stated that worrying about a peak is similar
      to worrying about the Dow at 3000. I am not sure
      about this. Maybe, I am gloom and doom but I would
      never start to put a blind eye to any indicators by
      stating that the cyclical reduction makes everyting ok
      (sorry had a bug up my butt on that one).

      If the
      cycles have been reduced that earnings will never stop
      growing even during a negative cycle. As I stated in the
      last message, I think the market is turning around as
      far as sentiment towards the industry. However, the
      market recently is extermely volatile (the housing
      industry may have gone less cyclical but the stock market
      response is way more cyclical these days), and I would
      never put a "just dont worry" attitude to the stocks. I
      am enjoying the ride up but will keep my eyes on the
      backlog.

    • Look up MTH on quote.yahoo.com and then click on the profile. This lists, among many other things, the short position, days to cover,and the float.

    • Also to respond to your quote <<If the
      earnings ever start decreasing the valuation of these
      companies may start to lose ground. I would like to assume
      that the housing market will continue to rise but past
      cycles have shown that there is a limit to this rise.
      >> I say, you would have to see quite a dramatic
      negative shift towards earnings going negative before the
      p/e's would ever start reversing, even then, to what,
      the teens? Housing would have to absolutely and
      totally crash in such a scenario. If that happens, so too
      probably would the stock market.

      The valuations are
      so laughable now in the face of what is going on,
      that Timothy Jones of SE Research Partners has said: "
      The P/Es are below the absurd low multiples of the
      last six and a-half years virtually across-the-board.
      In 31 years, I've never seen the stocks so cheap
      with the outlook so good." Obviously, it is a joke,
      and an extreme we have at one end of the stock market
      spectrum. The other end of the extreme would be some of the
      internet issues with no earnings at all.

      There may
      be limits to the rise in the housing market, but
      that does not mean that it has to either crash or
      peak, in fact taken in the context of long term,
      sustainable activity is what the story line is. As well, when
      companies begin to acquire and merge, this too propels and
      sustains earnings in weak periods, which again will not be
      as pronounced as times past because business models
      have changed to smooth out rough period. Bottom line,
      there is no evidence whatsoever of a slowdown, that is
      a myth that has taken on huge porportions thanks to
      the media and East Coast analysts who generally
      haven't a clue and still are living in the 70's! They are
      all worried about "what if's". Well, I say, What if
      Grandma had balls, then she would be Grandpa. They have
      their minds made up, never mind the facts!

    • I post quite frequently on the KBH board, the
      largest builder now based on deliveries. Here are the
      basic rebuttals to the "it is cyclical and near it's
      peak" argument most typical of those who think the U.S.
      Border stops right at the Mississippi.

      1) Much
      less cyclical than in the past. Unlike years past,
      builders like KBH now build "to order", copying Dell
      Computers' model. Meaning, that in years past, homes were
      built first then sold to buyers. When recession hit,
      they had unbuilt inventory sitting there, making the
      bottom line look terrible, as cash was expended to build
      the things, then they sat and sat in the weather
      having to be maintained waiting for buyers at some
      point. Now orders are taken, backlogs are built THEN the
      homes are built to order. This one change alone
      obviously translates into far more efficiency in the
      channel. Then, you have pricing power as the companies
      have expanded. Contractor efficiencies have also
      greatly improved, the communication and technology
      revolution has also greatly enhanced their productivity as
      they can keep closer tabs on every aspect of
      development.

      I am working on getting a copy of the chart
      presented at the KBH annual meeting that clearly showed a
      pattern of steadier, healthier profits and margins
      indicating during more recent periods (in the 90's) of
      housing slowdowns when compared to recessionary events of
      the past. Even in the ugly California recession of
      1990-94 (and in some cases till 96-97 and now in the
      beginnings of the rebound) profits held up quite well when
      compared to earlier times. The evidence clearly shows that
      the cyclical slowdowns have far less impact on the
      builders bottom line than they did when this notion became
      ingrained in the heads of the spin doctors who have
      convinced most everyone that nothing has changed since the
      70's, when in fact it has.

      2) Tax laws for
      selling real estate are far more advantageous with the
      most recent changes in the exclusion laws for claiming
      capital gains taxes when selling a home. It is no longer
      a one time lifetime exclusionl. Another capital
      gains cut would expand this even further, keeping
      robust housing activity at a high pace.

      3) Many
      buyers are far less concerned with interest rates than
      in the past, as they are in a "move up" mode, to
      other homes or locations as their jobs dictate. If they
      need a home, they will buy it, and 8-9% rates in the
      context of what they have been over the last 25 years are
      still very, very good interest rates.

      4) Demand
      out West especially, is far outpacing supply. In S.
      California for example, only 1 new home is being built for
      every 4 jobs created. Assuming demand stays strong and
      the economy does not collapse, it will at some point
      slowly sink in to the financial experts who always have
      the economy and the markets outguessed that they have
      misjudged the staying power of the consumers.

      4)
      About the "activity is at an all time high, therefore
      it must go down" argument, well the same was said
      when the Dow was at 3,000. OK, that is a flippant
      response, but instead of looking at it as "peaking", the
      more appropriate reaction should be that activity is
      "high, and perhaps levelling off at a high sustainable
      pace as long as the economy does not collapse and take
      down everything in it's wake in entirety."

    • <<Thanks for the commentary. I agree with
      much that you say. However, you seem fairly fatalistic
      about it.
      Wouldn't you expect that these companies
      will have to come out of the doldroms eventually?
      Value stocks
      will come back into vogue sooner than
      we think, and we will have grabbed these stocks for
      a pittance! I think
      that a CEO's evangelism
      shouldn't be the deciding factor in the growth of a stock's
      share price. >>

      Some really nice posts
      discussing the low pe of the industry. I tend to agree with
      you that value stocks eventually return. Further if
      the number of "why is the pe so low" type messages
      are any indication of the number of people
      recognizing the low valuation of home building stocks, this
      return may already be slowly happening.

      However,
      one worry for me is that homebuilding as an industry
      is cyclical. The homebuilding market is at an all
      time high indicating we are at the high cycle of this
      industry. The low valuation of course results from a high
      earnings from all the companies. If the earnings ever
      start decreasing the valuation of these companies may
      start to lose ground. I would like to assume that the
      housing market will continue to rise but past cycles have
      shown that there is a limit to this rise. Where the
      present market is with respect to this cycle is not
      known. However, the feds are already starting to hike up
      the interest rate and the country is at an all time
      high in % of families owning homes.

      So
      assuming the market starts to recognize the housing
      industry as undervalued, this may build momentum and raise
      the stock price (recent stock movement seems to
      indicate this to be the case). However, if the housing
      market starts to backslide, the valuation and
      expectations may also start to slide. As the backlog of most
      of these companies are at record highs, I do not see
      this happening over the next few quarters. However, it
      now seems that its a race to return the valuation of
      the stocks before the housing industry enters the
      negative cycle. I have been holding homebuilding stocks
      for about 6 months now and have enjoyed a nice profit
      (CROS, and NHCH though I now like this stock better).
      However, I will keep a close eye on that backlog and on
      the feds interest rate movement.

    • Lewestfall,

      How did you find out the short position?

      Thanks.

      SZ.

    • Why is there such a large short position (4% of float)? Does someone know something bad that I don't?

    • MTH shows that well designed and built homes are starting to attract customers.

      GO MTH!

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MTH
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