Time to Buy the Dips In Homebuilders

This is an excerpt from an article I originally published on Seeking Alpha on January 12, 2012. Click here to read the entire piece.)

I last provided a comprehensive review of the housing market on September 29, 2010 in “Still Expecting Housing to Bounce Along the Bottom Until 2013.” At the time, I reiterated the case for housing not to bottom until 2013 with the market mainly muddling along until then. I still hold that view. Accordingly, last quarter, I began transitioning from a bearish positioning to what is now a bullish one on homebuilder stocks. {snip}

In the first week of January, my brother asked me whether I knew of any good mutual funds for playing the housing market – this is the same brother who was written detailed and insightful analyses on the housing market for me. I casually mentioned homebuilders and gave him a brief case for buying some shares in KB Home (KBH), mainly because the stock remains a laggard amongst publicly traded homebuilders.in the group. {snip}


Kb Home is trading above its 200-day moving average (DMA) for the first time in 9 months
Kb Home is trading above its 200-day moving average (DMA) for the first time in 9 months


Despite falling as much as 41% in 2011's swoon, Toll Brothers outpaced a flat S&P 500 with a 7% gain to end the year
Despite falling as much as 41% in 2011's swoon, Toll Brothers outpaced a flat S&P 500 with a 7% gain to end the year


Source for charts: FreeStockCharts.com

Much to my delight, my brother returned to me later that day with a reassuring review of my madness: “I did a little research and I think your call for KBH is spot on.”

{snip}

There are other reasons to stay focused on buying the dips in homebuilder stocks…{snip}…The Federal Reserve and investors alike appear ready to turn up the heat to force a bottom in this market. {snip}

Here are some key points and statistics from the Fed’s 28-page paper that interested me:

{snip}

Whatever form a housing bottom takes, all things considered, I am guessing it will not be explosive. {snip}

Be careful out there!

This is an excerpt from an article I originally published on Seeking Alpha on January 12, 2012. Click here to read the entire piece.)

Full disclosure: long KBH

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