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David Guarino  

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  • How Is Your Homebuilding Stock Handling Rising Rates? A Correlation Study [View article]

    Thanks for the comments. You bring up some interesting points however the data from many publicly traded builders shows demand is not weakening. There are so many factors (population growth, job growth, high rent prices, low levels of home ownership, low levels of home inventory, etc.) that point towards a continued recovery in housing. I don't think Fed tapering will completely fizzle out this rally. Although higher rates will knock some buyers out of the market, the Fed's position thus far has been keeping rates low for the foreseeable future. The difference between a 4.5% mortgage and a 5.5% mortgage will not drastically impact demand for new homes (in my opinion).

    Attempting to time stock purchases based upon what the Fed is going to do will always be a difficult task. Since we do not yet know the size or scale of the tapering, it may be wise to slowly build a position rather than buy the full position ahead of a major announcement.

    -David Guarino
    Sep 17, 2013. 11:31 AM | 1 Like Like |Link to Comment
  • Ryland Homes: What To Do Now That The Stock Is 30% Off Its Highs [View article]
    Great call on the company be overvalued in your last article, looks like you timed that just about perfectly.

    I agree with you on valuation in the industry at these levels. The market is overly concerned about what rising interest rates can/will do to homebuilders and the industry has been punished over the past few months. However it appears companies like Ryland Group are still seeing strong demand and that trend is not slowing down.

    -David Guarino
    Aug 26, 2013. 03:09 PM | Likes Like |Link to Comment
  • Beazer Homes Is All In [View article]
    There seems to be quite a bit of talk about quality of Beazer homes. Due to the fact that I have never built or inspected a home professionally, I am not going to challenge the real estate expertise of "TAS", "Rothbuilt", of "Joe Kelly". They are entitled to their opinion and may very well be correct regarding the quality of Beazer's product.

    As an investor however, I like to focus on how the company is operating and what financial benefits it can create for shareholders. Two metrics I recommend investors evaluate. First, is the backlog for Beazer moving in the right direction? If yes then consumers are obviously seeing value in the product. Second, how are warranty expenses looking? If the homes are in fact built with poor quality standards we would likely see more claims from homeowners and thus higher warranty expense (all new Beazer homes come with a warranty). Look at page 63 of last years 10-K filings and you can see that warranty "payments made" and "warranty liabilities" have all drastically declined over the past few years.

    I struggle to believe the "cheap" quality argument if more consumers are buying Beazer homes and less warranty claims are being made.

    -David Guarino
    Aug 12, 2013. 08:46 AM | 3 Likes Like |Link to Comment
  • Home Builders Are Poised For A Big Pullback [View article]
    Well balanced article, you bring up some great points.

    I think you have to consider the supply/demand equation in addition to your interest rate theory. There is a huge imbalance between renting/buying and regardless of a 100bps rise in rates, home ownership is still much more attractive to renting. Couple that with the pent up demand for home ownership due to the rapidly growing number of renters, and I foresee a stable real estate market for years to come.
    Aug 12, 2013. 08:14 AM | Likes Like |Link to Comment
  • Lumber Liquidators: Let's Be Realistic [View article]

    Thanks for your posts regarding this article. While I disagree with your optimism for LL, I appreciate your input. You have certainly done your research and offer some very good arguments against my points listed above.

    Regardless of our disagreement, it is good to see the SA community sharing ideas back and forth, this will lead us to all become better investors.

    David Guarino
    Jul 26, 2013. 09:25 AM | Likes Like |Link to Comment
  • Lumber Liquidators: Let's Be Realistic [View article]

    Thank you for the reply. I think you summed up my thoughts in your response to "adbrothers" post.

    I would add one more comment. Regardless of what management says on earnings calls, it is important to validate their comments with actual data (for example looking at the CME data). I find it very hard to believe that inflation is not affecting their cost of goods, unless of course they are shifting to a lower quality product.

    -David Guarino
    Jul 25, 2013. 01:31 PM | Likes Like |Link to Comment
  • Private Equity Investment In AV Homes Could Power Company Higher [View article]

    Thanks for your comments, however the AV Homes of today is quite different (given the TPG investment and management change) then the AV Homes (Avatar Homes) of the past. Rather than spend time informing readers on where the company has been, I prefer to focus on where they are headed.

    Good luck to you.

    -David Guarino
    Jul 25, 2013. 12:04 PM | 1 Like Like |Link to Comment
  • Private Equity Investment In AV Homes Could Power Company Higher [View article]
    Envoy Global,

    Thank you for the comments. You are correct, the Poinciana Parkway project is extremely important to AV Homes, however this is news I assumed investors were already aware of (and most likely priced into the stock). The purpose of my article was to highlight growth opportunities given the new capital from TPG.

    Regarding the preferred stock, you are correct that the preferred shares may not be outstanding for long. However SEC form SC 13D states:
    "Upon receipt of Stockholder Approval, each share of Series A Convertible Preferred Stock will become convertible, at the option of either the holder or the Issuer, into shares of Common Stock at an initial conversion ratio equal to ten shares of Common Stock per share of Series A Convertible Preferred Stock.......In the event that any Series A Convertible Preferred Stock remains outstanding on the 180th day following the Closing, the liquidation preference and conversion ratio will be adjusted to equal 110% of the liquidation preference and conversion ratio, respectively, in effect immediately prior to such adjustment. "

    While it is likely shares will be converted, there is no guarantee this will occur. Thanks for the post, and good job on the recommendation back in June.

    -David Guarino
    Jul 25, 2013. 11:59 AM | Likes Like |Link to Comment
  • Private Equity Investment In AV Homes Could Power Company Higher [View article]
    It appears that short interest peaked just after the TPG announcement (possibly fear that the deal may not go through), but in the past few weeks the number of shares short has been declining.

    David Guarino
    Jul 25, 2013. 08:44 AM | Likes Like |Link to Comment
  • Lululemon: Is The Worst Still To Come? [View article]
    Check out page S-9 from the link below. Prior to the sale Mr. Wilson owned 40,243,219 shares and following the sale that was reduced to 36,843,219 (25.41% of company). Looks like the bulk of those shares are "exchangeable shares of Lulu Canada".
    Jul 12, 2013. 02:30 PM | Likes Like |Link to Comment
  • Even With Negative FCF, Apple Still Undervalued [View article]
    I agree with you that market sentiment is a very powerful force in the pricing of stocks. However over the long term I believe stock prices will ultimately follow earnings. Sooner or later the market will realize the value in AAPL.

    Thanks for your comments.

    -David Guarino
    Jul 9, 2013. 11:40 AM | 1 Like Like |Link to Comment
  • Even With Negative FCF, Apple Still Undervalued [View article]
    No problem, thanks for the comments.

    -David Guarino
    Jul 9, 2013. 11:16 AM | 1 Like Like |Link to Comment
  • Niche Market Acquisitions Keep Heico Flying [View article]

    Thanks for the comments, well said. I couldn't agree more about listening to the financial statements.

    David Guarino
    Jun 24, 2013. 05:56 PM | Likes Like |Link to Comment
  • Bernanke Spoke - Now What? [View article]
    Great article, thanks for your insight. I am with you on the housing recovery story. It appears the market is overreacting to the Federal Reserves language and now may be a great time to start building a position in some of those names.
    Jun 21, 2013. 08:40 AM | Likes Like |Link to Comment
  • When Inventory Becomes Sales, Toll Brothers Poised For Growth [View article]
    You make a good observation regarding the 10 year treasury however I believe this move in interest rates is just "noise". There are may investors who believe in a sustainable housing recovery (myself being one) and many who do not believe. Since we are in the early innings, any positive news or negative news is going to cause home builder stocks to become quite volatile. The level of interest rates is a perfect example of this. If mortgage rates went up by a few hundred basis points we may see home buyers put off making a purchase, thus hurting Toll Brothers. However what we witnessed a few weeks back was interest rates rise 50 basis points (I follow the 30 year treasury bond which is a better fit for mortgage rates). I don't believe that home buyers are going to pass on making a purchase because rates ticked up 50bps. Especially considering all the pent up demand for housing.

    Regarding the company's earnings, I would struggle to compare 2007 valuation levels with today's valuation levels. We are in a very different housing environment. From a technical standpoint you may have a case, but to me that is just "noise" as well. The fundamental growth story is intact for this company and I am a firm believer that stock prices will follow earnings, not chart patterns, over the long term.

    Thanks for your post.
    David Guarino
    Jun 11, 2013. 02:03 PM | 1 Like Like |Link to Comment