To Go Long Or To Go Short
Bill Miller, the famed-Legg Mason fund manager, was on television last week saying he is long housing stocks. In Barron’s Up & Down column, Doug Kass of Seabreeze Partners was cited as being short the stocks–no big surprise there.
Kass referred to order cancellation as the reasoning for his bearishness. Typically, publicly traded homebuilders have cancellation rates of 15% of orders; however, that has jumped considerably.
Cancellation rates of publicly traded homebuilders:
Centex — 37%
DR Horton — 40%
KB Homes — 53%
Lennar — 31%
Pulite Homes — 36%
Beazer — 57%
Hovnanian — 35%
MDC Holdings –49%
Standard Pacific — 50%
These numbers are all provided by Kass, according to the Barron’s article. These numbers are so bad that the worst might be unfolding right now.
TheFly’s advice, Miller tends to be too early and Kass is often too negative when the worst is already priced in the stocks. Start following these stocks again, expecting a bottom in the spring and early summer.
The most recent rally is mostly from an oversold condition. Wait for another correction and see where the industry fundamentals stand.
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