Bill Miller, the famed Legg Mason fund manager, was on television last week. He said he is long on housing stocks.In Barron's Up and Down Wall Street column (subscription required), Doug Kass of Seabreeze Partners said he was short housing 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 number has jumped considerably. Cancellation rates of publicly traded homebuilders:
- Centex (NYSE: CTX) - 37%
- DR Horton (NYSE: DHI) - 40%
- KB Homes (NYSE: KBH) - 53%
- Lennar (NYSE: LEN) - 31%
- Pulte Homes (NYSE: PHM) - 36%
- Beazer (NYSE: BZH) - 57%
- Hovnanian (NYSE: HOV) - 35%
- MDC Holdings (NYSE: MDC) - 49%
- Standard Pacific (NYSE: SPF) - 50%
TheFly's advice, Miller tends to be too early and Kass is often too negative when the worst is already priced in the stocks. I'd say, start following these stocks again, expecting a bottom in the spring and early summer.
The most recent rally is mostly from an oversold condition. I'd wait for another correction and see where the industry fundamentals stand.
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