Shoot-first approach isn't working
It was a bad call to expect a rollback in all housing stocks based only on KB Home's awful earnings report last week.
Last week we got a report from KB Home (KBH) that was an unmitigated disaster and spelled what looked to be the end of the housing rally. Given that so much depends on housing coming back, the KB Home debacle portended a rollback of the whole complex, everything from Stanley Works Black and Decker (SWK) and Home Depot (HD) to Whirlpool (WHR) and USG (USG).
Oops. Real bad call. Because it turns out that the fault was not in the home stars but in KB itself. In fact, the chief home star, Lennar (LEN), really blew things away Monday, and it is back to being game on, with the whole group rising with the prospects of increasing orders, improving gross margins, declines in cancellations and the hope that we are getting back on track in the home biz.
Of course, we probably could have bottomed in homes a few years ago if Congress hadn't seen fit to give a big handout to everyone who bought a new home, which only encouraged an increase in inventory. That's exactly what we didn't want, as my friend and colleague Matt Horween has articulated many times.
It created an unfathomable number of new homes and, when coupled with a huge tax boondoggle for the companies, kept all of the publicly traded homebuilders afloat. I have no desire for any company to go under, but marginal players like Hovnanian (HOV) did the market no favors by continuing to pump out houses long after they were needed simply because it had the capital to do so.
Now it looks like the inventories are getting leaner. Yes, we had horrendous Case-Schiller numbers Monday, but they are about three months old. They showed a rather remarkable turn in the hardest-hit areas, notably Miami and Phoenix. But you can see the home inventories pouring out of the banks when you look at the horrible numbers from Atlanta and Chicago, to name two newly hard-hit areas.
Nonetheless, what happened with Lennar is a reminder that when people shoot first in this business in 2012 and then ask questions later, they are not being rewarded. Those who buy the shootings have been the winners, because the shootings don't seem to be caused by anything negative. They are minor chords. But the major chords come from the best-of-breed plays, and they are singing in unison whether from Home Depot or Macy's (M) or Chipotle (CMG) and Panera (PNRA).
Keep the KB Homes-Lennar bipolarity in mind when you want to take action. You just might want to be on the other side of the trade.
this guy is the exhibit number one of how grifters work their trade
BEWARE THE SHYSTER
yes he is a great business man........while losing tons and selling his crap he is making money
just like a used car salesman selling to the uninitiated
THE REVEREND JIM BOB CRAMER FROM THE CHURCH OF WHATEVER WAS UP YESTERDAY
remeber in december when this genuis said sell BAC at 5 and buy SLB at 83?
BAC doubled while SLB is now below 70
rigor?.........best of breed?.............LLLLMMMMFFFFAAAAOOOOO
STOP.......YOU'RE KILLING ME....I CAN'T BREATHE
Nope. All the rope is in Las Vegas. They use it there to hang crooked lawyers. My kind of town!
Cramer provides info. on environment changes effect on companies' earning. Also, he notes commodity and corresponding stock divergence. 'Cause of SLB and EOG's lower exposure to Nat. Gas, Cramer's recently recommended these "best of breed" companies over Chesapeake. SLB's yesterday "lower earnings due to lower fraking rates" announcement sounds like Cramer's typical earnings "under promise" "over deliver" tactic. With crude stubbornly over $100, you should have been "scale buying" SLB and EOG "on the way down".
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