Beazer Homes: Old Name Reaches New Low

I was watching the housing stocks back in August and September of 2007 when they were falling to new lows everyday but switched out of the industry in favor of banks, autos and financials. But after seeing an old name reaching a new low after-hours, I started to re-examine the old names.

Still Going Lower

I shouldn’t have been surprised but all the housing names that I had been short but got out of during short squeezes are pretty much all much lower now. Stocks like DR Horton (DHI), Lennar (LEN), Centex (CTX) and Beazer Homes (BZH) all reached new 52 week lows today.

Beazer Homes Worthless

One of my favorites over 9 months ago was Beazer Homes and this stock has fallen so far that there is barely any market capital left. And the analysts that cover the company are predicting incredible losses in the current quarter, the next quarter, the current year and the next year. A loss of 13.24 is now predicted for the current year. This is down from an expected loss of 5.14 from the same analysts 90 days ago.

Shorted and Shorted Some More

Beazer Homes is shorted by almost everyone. 63.20% of the outstanding stock is now short. Down 81% over the past year, the stock still could pop on a short squeeze but over the next 3 months, the company is not going to do well and the stock will continue to fall.

Option Trades are Still Possible

The final note on Beazer Homes that I noticed from analyzing some of the data on the stock and the company is that options are still possible trades. Often when I company reaches a point where it’s close to bankrupt, the options don’t outperform the stock and shorting the stock makes more sense if you can find shares to short. But the action yesterday in the options shows that you can purchase Puts in the month of August at a strike price of 5 and make more money on the options than from the stock itself. As the stock fell 10% yesterday, the August 5 Puts rallied 28%.

Disclosure: none

Comments

[User 86945:]

"but switched out of the industry in favor of banks, autos and financials"

Great call Steve!

2008 Jul 09 10:33 PM

[SUNDAN:]

THEY DID NOT REACH 52 WEEKS LOWS TODAY, YOU ARE WRONG SO WONDER IF YOUR ANALYSIS IS ALSO NOT OUT OF WACK.

2008 Jul 26 01:42 PM

[aredub:]

I took a look at their balance sheet (6/30/08) and they have absolutely no short term debt combined with the fact that they have more than doubled their cash since the previous reproting period. That makes for a perfect situation to ride out a recession. ????

2008 Dec 03 09:18 AM