staria

Housing: Did We Learn Nothing from the Dotcom Bust?

I think there is a lot of value in the Homebuilders sector longer term. Value the sector at Price to Sales. I assume that at the bottom of the cycle homebuilders are going to build let say 800tsd. homes p.a. The average price nationwide is around 200 tsd. USD. Makes around 160bn USD Top Down Sales. You pay for the sector as a whole right now ca. 40bn USD market cap (~ the same you pay for Merrill Lynch....). The average margin for the sector longer term is 8-10%. And for such a margin the stock market shold pay ca. 1 Price to Sales.... Buy the whole homebuilder sector right now ... and if you want an alpha trade, sale Merrill againts it....