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WallStreetDebunker

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  • 3 Stocks To Short In The Housing Sector [View article]
    DanTV,

    Phoenix is one of the few cities where real median income has risen significantly in recent years while home prices crashed excessively (below historical valuation metrics). It truly is a better market than 99% of the country. Unfortunately, the low-end prices rose so much in the last year or so or so that the market will likely lose some momentum. Arizona will see some more fed-up Califphony residents, so the market might remain one of the hottest in the US.

    Las Vegas is ridiculously cheap, but the huge number of FHA foreclosures are going to keep that market a mess for years. Plus, Phoenix is a far more desirable city than Vegas for families. Vegas has the most angry, insane drivers this side of Boston or Houston.
    Dec 6 11:11 PM | Likes Like |Link to Comment
  • 3 Stocks To Short In The Housing Sector [View article]
    RS,

    You're one of the more polite writers on SA. Why would I be jealous about your profits or any other anonymous person's profits? (My investment in PHM under $4 is the best performing investment I've had in the last 14 months. My homebuilder shorts gained a modest 10%, due to luck and good timing.) I was just pointing out that you flip flopped from your optimistic article on Sept 17, when the negative facts you mention above were already known to studious investors back in September. In any case, you should listen to the following interview of Jack Micenko on Bloomberg to bolster your bearish confidence:

    http://bloom.bg/TNyzV1

    I currently have no shorts but might do so again after the likely "fiscal cliff is averted rally!". TOL will not be on my list of possible shorts, as it is the one builder that will almost certainly earn its way into its valuation. TOL stock price has risen to 55 times its low price of 22 years ago. They are a market superstar and will likely continue to outperform their competitors in the long run.(I have a lady friend who is a very successful interior designer and TOL is the only McBuilder that she speaks highly about.)

    Good luck, and I appreciate that you are making a contrarian call that is more risky than your January long article. Obviously I believe that you will be proven correct in the next 6-12 months.
    Dec 6 10:45 PM | Likes Like |Link to Comment
  • 3 Stocks To Short In The Housing Sector [View article]
    Congratulations on your January speculation that homebuilder stocks would have a good rally in 2012. However, the negative issues you raise now were in existence when you wrote a September 17 article that was still brimming with optimism for the homebuilders mentioned above. (In fact, on Sept 17 you seemed a bit dismissive of comments that pointed out various flaws in the arguments used to fan the flames of the speculative builder rally. Ironically, TOL stock was 20% higher on Sept 17 as compared to today.)

    The real "recovery" in housing has been in multi-family construction--so much so that many experts are seeing pockets of excess and risky development of rental units. Unfortunately for the homebuilders, rental price competition from multi-family units will be another important headwind facing the homebuilders in future years. See this article for details:

    http://bit.ly/VzVSXO
    Dec 6 05:12 PM | 1 Like Like |Link to Comment
  • Amazon - History Tells Us That Shorts Will Be Rewarded [View article]
    In the long run, Walmart will likely do to Amazon what Walmart did to the dominant national grocery companies starting in the late 1990s. Walmart has the cash and profit generation to grind down competitors in any industry. They're now ramping up internet retail commerce and clearly intend to go after Amazon's market in a big way.

    Walmart can outlast Amazon in a price war, and it can compete on delivery time. Right now Walmart has fewer products available than Amazon. That will change. It took Walmart a decade to grind Safeway, Kroger, and Supervalu into minor league grocers.

    I don't shop at a bricks and mortar Walmart because I find the stores somewhat depressing, but I do shop at Walmart.com, mainly because they often beat Amazon's prices.
    Dec 5 03:44 PM | 1 Like Like |Link to Comment
  • Toll Earnings Preview: Has The Stock Price Discounted Dramatic Improvement In Fundamentals? [View article]
    A popular meme on financial websites is that the public builders will have far less competition in the future because private and local builders have left the homebuilding business.

    As I've stated in comments elsewhere, the statistics for member builders in the NAHB don't support this belief. Today, we have more news contradicting this belief, as a large builder, Taylor Morrison Homes, has just filed to do an IPO for up to $250 million. For 2011, Taylor Morrison posted revenue of $1.37 billion, which is similar to TOL's revenue in 2011.
    Dec 5 03:12 PM | Likes Like |Link to Comment
  • Another Real Estate Bubble? [View article]
    The US office property vacancy rate was roughly 8% in 2000. Currently it's close to 16%--a mere 1% below the highest vacancy rate since 2000. Many national retailers are still closing stores around the company--still over 10% vacancy.

    Multi-family housing is where the real action is.
    Dec 5 12:49 PM | 2 Likes Like |Link to Comment
  • Toll Earnings Preview: Has The Stock Price Discounted Dramatic Improvement In Fundamentals? [View article]
    Jack Micenko at Susquehanna International Group has presented the best valuation argument against homebuilder stocks. I recommend listening to his Bloomberg interview for those who want a balanced perspective. He views TOL in a more favorable light than other builders because of the affluent customers and TOL's increase in condo development.

    Were any TOL shareholders surprised at the heavy selling this morning after the opening pop? It seems rather odd in light of the solid earnings report and forecast.

    TOL sells to the best demographic (affluent people), but many TOL customers will be pinched by upcoming tax increases, especially customers in California.
    Dec 4 02:07 PM | 1 Like Like |Link to Comment
  • Picking Homebuilder Stocks For 2013 [View article]
    "...Eventually, population growth/household formation would put pressure on an industry where inventories have become scarce due to a lack of sufficient building."

    It's true that "eventually" population will exhaust the excess housing inventory--including the millions of foreclosed and pre-foreclosed homes that haven't hit the market yet. The idea that the inventory will be cleared out in a year or two makes no sense, unless the economy is going to create a boom in jobs and wages in the next year. Good luck with that theory.

    Admittedly there's been some excitement in housing this year. But new single family home construction is far less impressive than the headlines suggest. Incomes are stagnant. Young buyers are conspicuously absent. Take out the speculators and nouveau landlords, and you still have a market that is the worst in history.
    Dec 3 09:09 PM | Likes Like |Link to Comment
  • Toll Earnings Preview: Has The Stock Price Discounted Dramatic Improvement In Fundamentals? [View article]
    Look up the history of the public homebuilder Tarragon Realty Investors. It went bankrupt in 2009 in spite of ramping up in-fill multi-family housing before their competitors.
    Dec 3 04:24 PM | 1 Like Like |Link to Comment
  • Toll Earnings Preview: Has The Stock Price Discounted Dramatic Improvement In Fundamentals? [View article]
    I was comparing TOL's current price and valuation to 2003. I'm discarding 2004-2005 data, which were obviously the final stage of a parabolic bubble.

    Near the end of the year in 2003, TOL's peak price (in 2003) was $21.50--a year in which TOL's earnings were $1.72. Earnings increased dramatically in the next two years.

    You're suggesting that people should be willing to pay $42 in the not-distant future for TOL when Wall Street estimates that TOL will earn only $1.08 next year (and less than $2 in 2014). This is far less than the earnings in 2004.

    The current price of TOL will work only if there are several years of huge increases in housing profits--in an environment where home prices are unlikely to jump up as in the bubble years. TOL's P/E ranged from 5 to 14 from 2002 to 2006, with all but one of those years having peak P/Es of 12 or less.

    P/E ratios were reasonable through the entire housing bubble. It's only now, after Wall Street is playing the momentum game again, that valuations are unreasonable.

    Your article was more balanced than most, in spite of my belief that your most optimistic valuation argument is very speculative and likely to disappoint. Insiders seem to validate my argument, as selling has been massive in the last six months among a range of homebuilders.

    P.S. The company NVR has the best balance sheet among the builders, not TOL.
    Dec 3 04:03 PM | 1 Like Like |Link to Comment
  • Toll Earnings Preview: Has The Stock Price Discounted Dramatic Improvement In Fundamentals? [View article]
    At TOL's peak stock price in 2003--in the middle of the greatest housing bubble in the history of the United States--TOL stock sold for $21.50. In 2003, TOL earned $1.72, and in the following year TOL earned $2.52.

    Just two months ago speculators have paid as much as $37 per share for TOL stock, in spite of the fact that Wall Street estimates TOL earnings will be $1.08 in 2013.

    Let me provide another perspective. A decade ago, TOL investors were willing to pay no more than 67% of the current stock price for more than double the earnings.

    In the current hyped up housing recovery, the acceleration in multi-family construction exceeds the acceleration in single family construction (off a historically low base). A fraction of TOL's revenue is from multi-family housing.

    Wall Street estimates were wrong at the depths of the housing bust, but now we're supposed to assume that current estimates are solid? Other than cloud stocks, this sector might have the highest speculation factor in the entire market.
    Dec 3 01:39 AM | 1 Like Like |Link to Comment
  • Goldman's S&P 1,575 Call: 4 Ways To Play It [View article]
    I wouldn't disparage doomers. Doomers typically own lots of gold, which has risen nearly 500% since 2000, while the SP500 has barely broken even (including dividends & adjusting for inflation).
    Nov 30 11:10 PM | Likes Like |Link to Comment
  • Goldman's S&P 1,575 Call: 4 Ways To Play It [View article]
    Goldman is predicting 1575 for the S&P 500?? The last time they used this magic number was when Abby Cohen predicted 1575 for year-end 2000. Looks like it's time to prepare for another 50% market decline.
    Nov 30 01:58 PM | 1 Like Like |Link to Comment
  • Stick With Supervalu - A Sale Is In The Works [View article]
    F&E is still unprofitable but growing revenue and market share. The brand is still only 5 years old. It's risky, but still a better gamble than turning around SVU. (No legacy costs, growing brand awareness, smaller store format better suited to the growing popularity of quick/convenient neighborhood markets).
    Nov 30 01:09 PM | Likes Like |Link to Comment
  • Stick With Supervalu - A Sale Is In The Works [View article]
    It just seems like the private equity guys could do better with their money. For example, Tesco is having tough times and seems to be uncommitted to their American Fresh & Easy chain. They might be willing to sell it. This grocery format is contemporary and could carve a niche throughout America without having to go against Walmart. Trying to fix SVU's traditional stores seems too hard.
    Nov 29 11:56 PM | Likes Like |Link to Comment
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