I honestly can’t believe that more investors are not looking at unloading long positions in the homebuilders. Right now, by virtue of the fact that there’s a lack of good analytic “eyeballs” slicing and dicing the industry numbers and the homebuilder financials, the homebuilder stocks are the most inefficiently overvalued sector of the stock market besides a few select tech stocks. I’ve been trading every part of the homebuilder capital structure since 1994 (bank debt, sub debt, pfd equity, common stock) and right now this is the easiest call I’ve seen in that period of time.
Here’s my latest assessment of the macro housing data, backed up by some evidence I’m correct that comes right out of Toll Brother’s earnings report two days ago, when TOL’s stock was hit for 5%: Housing Market Data Continues To Support The Bear View.
I have two short-sell ideas in my research report section. In the first report I review an area of accounting fraud that I’ve discovered at every homebuilder. Wall Street has turned a complete blind eye to it. What it means is that p/e ratios are much higher than everyone assumes. The second report has an options trading strategies for anyone who is not comfortable shorting stocks outright.
You can access the reports here: Homebuilder Stock Short-Sell/Options Ideas
At the very least, anyone who is a financial adviser or money manager and has client money invested in the homebuilder sector has a fiduciary duty to look at the facts and re-examine their assumptions about the sector. I am confident that the two stocks in the link above will be trading well below $10 within a year to two and one of them, which has as much debt as it does inventory, will eventually go bankrupt.