There are so many better housing related values out there. PHM has priced in the recovery. The money has been made here. Do a little digging and you can find much better buys in related industries that will also benefit from the improved market.
My personal favorite at the moment is UUU Universal Security Instruments. They make smoke and carbon monoxide detectors. Their products are available everywhere (home depot etc). They have the newest and best technology in the industry and unlike the home builders this company is a bargain. The company is selling near a 52 week low, they have zero debt, lots of cash, priced at less than half of book, last quarters revenue up 50%.
The problems the small builders have (driving their negative sentiment) are the boon to the large builders. Pulte will only need to buy land in very selective areas as they've got a war chest full of of buildable lots in many regions ..... in fact they're constricting building in order to keep margins steady.
Again, you are totally right here. Small and medium builders do have negative sentiment because we can't get reasonable financing and we have to bid for the few custom contracts where some builder will build it at cost just to generate cash flow. The big public builders now control the new construction business and they will be able to make more profits on fewer houses.
This exactly why I am not hot on the suppliers as I don't think the large builders have the capacity to reach the housing starts on their own without the production of the small and medium builders. But I think builders like PHM will see huge profits for several years.
Homebuilder stocks were broadly higher Tuesday after the Commerce Department reported that construction of new homes jumped by far more than economists expected. Overall housing starts surged by 7% to a seasonally adjusted annual rate of 1.04 million, well above expectations of a 1.7% rise to 933,000. PulteGroup Inc. (PHM, $18.27, +$0.42, +2.35%), Lennar Corp. (LEN, $38.38, +$0.60, +1.59%) and building
I hope you are right. The economy is better than the speculators have pushed it as over 60% of the companies reporting have beat their earnings estimates. PHM should easily beat their estimates, making this a great entry point.
Larger builders have dismissed the souring sentiment as a reflection of smaller rivals' travails. They have deeper pockets and easier access to credit. They've also banked some land at cheaper prices during the downturn and are now reporting their healthiest orders in years.
Sentiment: Strong Buy