Homebuilder Stocks That May Offer Value Here

One quarter ago, we looked at the discounts that many home builders were trading at relative to their book values. Let's see what they look like now:

Right off the bat we see that a couple of home builders with high debt levels were unable to continue in their former states. Writedowns in this industry continued in the past quarter, as book values continued to fall. In many cases, however, market values actually rose, and therefore many of the discounts are not as pronounced as they were one quarter ago.

Looking at a distribution of these companies across debt and discount levels reveals the following:

As value investors, we are of course interested in low debt, and large discounts (we care nothing for the stock's momentum, its moving average, its support levels, and other criteria that are completely unrelated to its intrinsic value). As such, the two companies which are circled, (MHO) and (LEN) in the chart above, may offer value. Of course, this cursory glance only scratches the surface of these stocks, and so we will have to take a closer look at these companies in future posts...

Comments

[PeteK:]

I looked at some new homes built by BZH recently and found that these homes are very well built and of good quality. Prices are quite reasonable. The company is well managed and agents are very friendly.

2008 Sep 22 05:25 AM

[JohnKing:]

You are a fool for even suggesting a bottom or buying opportunity in home builders.

There is no demand for housing whatsoever.

When builders can't sell houses, are they even builders?

2008 Sep 22 08:10 AM

[Investing i...:]

I love low debts and high discount, but the problem is when the stock price would go up in the situation like at the moment.

2008 Sep 22 09:46 AM

[D-D:]

I read the comment by "JohnKing" above and started laughing. I absolutely agree with him when he said "When builders can't sell houses, are they even builders? "
Folks, we have a long, LONG way to go before the housing market
can recover - - DD valuestockinvestors.bl.../

2008 Sep 22 10:40 AM

[WAKEUP:]

So, what happened to those writers, last year, who said that the bottom would be in by late 2008? Oh, they're not saying that any more? How about the late part of 2013?

2008 Sep 22 08:38 PM