No doubt the publicly-traded homebuilders were among the hardest hit stocks when the housing bubble burst in 2008. The ensuing rash of bankruptcies and home foreclosures devastated the housing market, dropping many of the once high-flying builders into the ranks of the small and micro caps.
For many investors, the question now remains: when is the right time to get back into these homebuilding stocks? In
recent weeks, thanks to some positive and unexpected results in new home sales, housing starts and existing home sales for the month of May, various bloggers and journalists have suggested that the slumbering housing market is beginning to awaken. Indeed, housing stocks as a group, including some of the larger cap companies such as Toll Brothers (TOL), Lennar (LEN) and PulteGroup (PHM) are up more than 60 percent this year, well above the S&P 500 which is up only 8 percent so far in 2012, according to Forbes.com (http://www.forbes.com/sites/greatspeculations/2012/07/02/dont-lose-your-home-betting-on-housing-stocks/?partner=yahootix).
Forbes contributor Christopher Versace warns that while the housing results in May were better than expected, there are many other indicators suggesting the results “may not have been as great as first thought.” Whether housing is on the upswing, or just experiencing a temporary blip, it’s certainly time to start watching some of the small cap homebuilders.
Indeed, many U.S. homebuilders are apparently raising cash on Wall Street to prepare for what they believe will be a recovery in new home sales, according to the Wall Street Journal (http://online.wsj.com/article/SB10001424052702303292204577519091363274160.html?KEYWORDS=robbie+whelan+dawn+wotapka).
Red Bank, NJ-based Hovnanian Enterprises (NYSE: HOV, http://www.khov.com) specializes in single-family detached homes, condominiums and town homes and operates in two segments: homebuilding and financial services. HOV delivered 4,216 homes in fiscal year 2011. The company’s 52-week trading range shows it was trading for as low as $0.89 last October and then went on a tear, going as high as $3.31 in early February and remains nearly double in value since January. Its market cap is currently about $350 million. The stock trades very actively, about 4.3 million shares a day. At mid-day July 11 it was trading for $2.65, down 5 cents for the day.
Los Angeles-based KB Home (NYSE: KBH, http://www.kbhome.com) is also a home building and financial services company catering in large part to first time buyers. KB is an old Southern California home builder, founded in 1957 and formerly called Kaufman and Broad. KB delivered 5,812 homes in fiscal year 2011. Its market cap is now $754 million and 52-week trading range is $5.02-$13.12. At mid-day July 11 it was trading for $9.74, down 29 cents for the day.
Columbus, OH-based M/I Homes Inc. (NYSE: MHO, http://www.mihomes.com) builds single family homes primarily in the Midwest, Mid-Atlantic and southern parts of the U.S. The company was founded in 1973 and, like most of the other builders, has homebuilding and financial services divisions. Its market cap is $331 million and its 52-week trading range is $5.08-$18.62. It has been setting new 52-week highs lately, but at mid-day July 11 it was trading for $17.50, down 13 cents for the day.
Atlanta-based Beazer Homes USA (NYSE: BZH, http://www.beazer.com) builds and sells single-family and multiple-family homes in 16 states in the U.S. It also acquires, improves and rents homes. The company operates through commissioned home sales counselors and independent brokers. Beazer is one of the companies cited by the WSJ (see above) as raising money, due to a regulatory filing announcing it would raise about $75 million by selling shares of common stock. Its market cap is about $283 million and its 52-week trading range is $1.35-$3.98. At mid-day July 11 it was trading for $2.86, down 13 cents for the day.