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PulteGroup, Inc. Message Board

  • hclasvegas hclasvegas Jul 9, 2007 8:20 AM Flag

    wall st j- feature story on the group

    and dropping book value.

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    • Good story but is this really a surprise to anyone?

      in the "I told you " category I came on here months ago saying there were energy companies selling at well below their net asset values and wouldnt it be smarter to buy an APPRECIATING asset vs A DEPRECIATING one when you can buy the appreciating asset cheaper (and they have earnings) I gave XEC and EAC as examples maybe DVN

    • can you summarize?

      • 1 Reply to ustadny
      • HEARD ON THE STREET
        Rule of Thumb Hammered
        Judging Home Builders
        By Book Value Can Sting
        As Write-Downs Mount
        By MICHAEL CORKERY and KAREN RICHARDSON
        July 9, 2007; Page C1

        A year ago, home-building companies looked like bargains. Looks can be
        deceiving.

        Many companies were trading near book value -- a rough estimation of what
        they would be worth in liquidation and typically a green light to investors
        to buy the stocks. Turns out it was a faulty signal, and one that is
        flashing to hopeful investors again.

        Value-seeking investors bought into the sector, and the builders' stocks
        surged toward the end of last year. But the subprime debacle and a rising
        supply of unsold homes have sent home-builder shares plummeting, erasing
        most of their gains.

        So, this time around, investors may be gun shy about following the old rule
        of thumb of buying the home builders at book value and selling after the
        shares have appreciated to at least twice book value.

        The problem is that book value is more of a moving target than a sure sign
        of a bargain. Book value is a company's assets minus its liabilities.
        Typically for builders, their largest asset is land, which in some cases,
        amid falling home prices, is no longer worth what they paid for it. That has
        forced builders to write down the land on their books. Meantime, the
        builders are still paying down the debt that they used to buy much of the
        land.

        At the end of June, for instance, home builders were trading at 1.1 times
        book, with some large companies, such as Beazer Homes USA Inc. and Hovnanian
        Enterprises Inc., going as low a multiple as 0.6, or 60% of book value,
        according to Morgan Stanley.

 
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