This Homebuilder Could Default In 2016

UPDATE: This stock is down over 3% today and headed lower

I was responsible for forecasting at Toll Brothers during the peak bubble years. My forecasting model showed a massive downtrun coming. The CFO refused to look at and consider my forecast.  Bob Toll ignored the signs and bought $1 billion of land at the peak in 2006. I saw the writing on the wall and quit before the brown stuff hit the fan I left the company to dodge the coming storm. Toll then lost money for 14 quarters in a row…It’s about to happen again.  – email yesterday from a well-known blogger

We’ve seen four homebuilders report their quarterly and or fiscal year end results so far. Two builders showed considerable unit volume delivery declines and two reported increases.  Going forward from here it will be all down hill.

In revising and updating my stock report for one particular homebuilder, I discovered that this Company has a huge debt repayment in second half of 2016.  This company must be worried about that because for the first time since 2012, it did not add homes to its inventory, it only replaced what it sold.  It’s cash balance still declined significantly year over year.

The stock is still down 22% from its price when I first published this report.  Even if I’m still early BlogPicon my call for the overall market, and I’m more confident everyday that the market is in trouble, this Company’s stock will likely head lower.   The section on prudent capital management and using options (puts and calls) has been updated to reflect my current suggestions.

Despite an increase in both price and unit deliveries, this Company’s operating income declined year BlogLOGOover year for its fiscal year.  That fact alone tells us that something is wrong with the way this Company operates.  Imagine that, in the greatest new home price inflationary environment in history, this Company is still having trouble generating a profit.

You can access this report here:  This Homebuilder Could Face Involvency In 2016.  The section on prudent capital management and using options (puts and calls) has been updated to reflect my current suggestions.

4 thoughts on “This Homebuilder Could Default In 2016

  1. Dave,

    What kind of games do realtors play on RedFin? There is this house that around the corner from me that’s been for sale for the past month. I’ve noticed that this is the second time that the property is not listed on Redfin as well as another property (been on the market for more than 2 months). All of this in one of the best school districts in Seattle.

      1. No, I don’t think so because it was listed on Zillow as well. Anyway, I’ve heard that realtors will pull a listing and relist it to reset the days on market.

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