Fritz Claridge

What Is Correct Way to Value Homebuilders?

Very interesting and informative comparison. I "lived" through the last bubble and California earthquake.
There was much digestion over a period of 1-2 years; nevertheless, the market came back with an additional 3 to 5X premium to pre bubble 'values'.

I feel comfortable with an experienced management and believe one has to be early to the party. It often gets uncomfortable, yet were one to believe that housing will 'come back' (as do I), today's stock prices appear to be a good entry point. Measurements such as PE, book value, Value Play, and Market are almost meaningless other than to compare among builders. Your selection of anticipated P/E is as good as any well thought out devise.

My key is to spread the risk by investing in several builders; do not use margin; and look for a long term (1 year) opportunity. One may check the builders ETF which appears excellent to me and spreads the risk (check out their holdings).

I am not a pumper. I have sold LEAPS of 08 and 09 on most of the builders including JOE and WCI (when they were at lower prices and with my diaper tightly wrapped aroung my waist).

Good hunting, Fred H. Claridge