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Positive US Housing Data Persists; The Recovery is Real

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Through the course of this week, we’ve received a number of positive data points suggesting the US housing recovery is well on its way. Long-time Valuentum members know that we’ve been very bullish on the housing turn since early 2012 (view the January 2012 edition of our Best Ideas Newsletter here). The S&P/Case-Shiller Index kicked off the week’s events with a 12% year-over-year price increase in the 20-city composite index for April (there’s a two month lag in the data). The 10-city index also rose 11.6% year-over-year. Both metrics have recovered to 2004 levels, but both remain well below the 2007 all-time (“bubble”) highs. Image Source: S&P Dow Jones Indices Image Source: S&P Dow Jones Indices We were also very … Read more

Why Valuation Matters: The Homebuilders

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Although the broader stock market sold off aggressively Thursday (the S&P 500 fell 2.5%), one industry was under particular pressure: the homebuilders. Shares of PulteGroup (click ticker for report: ), Lennar (click ticker for report: ), KB Home (click ticker for report: ), Toll Brothers (click ticker for report: ), DR Horton (click ticker for report: ), and Ryland (click ticker for report: ) all suffered declines of at least 5%. Homebuilding stocks have greatly benefitted from improving housing trends, but share prices had moved well ahead of the respective firms’ fundamentals. In our housing market industry overview released late May, we mentioned that homebuilding valuations looked particularly stretched. The group’s elevated prices coupled with the potential for the Federal … Read more

Toll Brothers’ Fourth Quarter Results Were Fantastic

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Tuesday morning, one of the nation’s premier homebuilders, Toll Brothers (click ticker for report: ) reported spectacular fourth quarter results. Revenues surged 48% year-over-year to $632.8 million, well ahead of consensus expectations. Earnings per share jumped to $2.35 per share from $0.09 a year ago thanks to the release of deferred tax assets. Pretax income jumped nearly 300% year-over-year to $60.7 million. Key metrics for Toll’s business were mostly strong across the board. Net signed contracts in the fourth quarter jumped 70% year-over-year to 1,098 units, with a 75% surge in value to $684.1 million. The firm’s backlog jumped 54% to 2,569 units, with the value of that backlog increasing 70% to $1.67 billion. Stronger pricing also helped gross margins … Read more

The Impact of the US Housing Recovery Cannot Be Underestimated

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Valuentum reveals the far-reaching implications of a strengthening US housing market.