Gafisa S.A.: The Only Homebuilder I'd Consider Buying at Present

Jul.11.11 | About: Gafisa S.A. (GFA)
Many investors have tried to catch the bottom for the home building stocks, and this has not worked out because there is no strong national rebound in housing. Chances are there won't be a significant rebound in the foreseeable future.

Most of the opportunities in this sector have been short term trading these stocks, not buy and hold. Many have made money buying the declines when the headlines were ugly and selling the rallies. It appears that there is one homebuilder that will be a better long term investment than most of the names in the sector and that company is Gafisa SA of Brazil (NYSE:GFA).

Gafisa is located in a country that has strong economic growth and demand for housing. It is also profitable at a time when most U.S. based builders continue to report losses. It makes far more sense to invest in a profitable homebuilder located in a high growth economy like Brazil, compared to investing in a money losing U.S. based homebuilder that continues to compete with a massive amount of foreclosed inventory that will continue to pressure the markets. With that in mind, take a look at the stock prices, earnings estimates and book values of the homebuilders below to see why the only home builder for me is Gafisa.

Gafisa SA shares are trading around $8.82 per share. Gafisa is a major homebuilder based in Brazil. These shares have traded in a range between $9.06 to $18.24 over the past 52 weeks. GFA earnings estimates are about $1.27 per share in 2011 and $1.51 for 2012. The 50 day moving average is $10.29, and the 200 day moving average is $12.98. GFA has dropped with the global stock markets and recently hit a new 52 week low at $8.78. The shares are trading below stated book value of $10.86 per share. Some have raised concerns over a possible restatement for 2009 which has also punished the shares, however the company remains solidly profitable. I would only buy this in stages to take advantage of any further weakness.

Toll Brothers, Inc., (NYSE:TOL) shares are trading at $21.23. Toll Brothers is a leading homebuilder. The 50 day moving average is $20.55 and the 200 day moving average is $19.91. The shares are trading above stated book value of $15.27 per share. Earnings estimates indicate a profit of about 2 cents per share for 2011 and 46 cents for 2012. Results have been weak and by looking at earnings estimates for the next couple of years, they are likely to be posting minimal profits for a $21 stock.

KB Home (NYSE:KBH) shares are trading at $9.73. KB Home is a leading homebuilder. The 50 day moving average is $11.23 and the 200 day moving average is $12.28. The shares are trading above stated book value of $5.76 per share. Earnings estimates indicate a loss for 2011 and small profit of about 10 cents for 2012. KB Home has been losing money recently and by looking at earnings estimates for the next couple of years, they are likely to be posting minimal profits for a $10 stock.

PulteGroup, Inc. (NYSE:PHM) shares are trading at $7.80. PulteGroup is a leading homebuilder. The 50 day moving average is $7.62 and the 200 day moving average is $7.61. The shares are trading above stated book value of $5.49 per share. Earnings estimates indicate a loss for 2011 and small profit of about 27 cents for 2012.

Beazer Homes (NYSE:BZH) shares are trading at $3.51. Beazer is a major homebuilder. The 50 day moving average is $3.71 and the 200 day moving average is $4.48. The shares are trading just below stated book value of $4 per share. Earnings estimates indicate a loss of $2.04 for 2011 and a loss of 95 cents for 2012.

DR Horton (NYSE:DHI) shares are trading at $11.94. DR Horton is a major homebuilder. The 50 day moving average is $11.58 and the 200 day moving average is $11.56. The shares are trading just below stated book value of $4 per share. Earnings estimates indicate a profit of 22 cents for 2011 and 58 cents for 2012.

Hovnanian Enterprises Inc., (NYSE:HOV) shares are trading for $2.47. Hovnanian is a leading homebuilder, based in New Jersey. The 50 day moving average is $2.44 and the 200 day moving average is $3.58. The shares are trading well above stated book value. Earnings estimates indicate a loss of $2.37 per share for 2011 and a loss of $1.23 for 2012.

The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.

Disclosure: I am long GFA.