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Short-Sellers Bet Against Homebuilders

September 27, 2012 | About:

Short sellers are now started to focus on homebuilding stocks. Many homebuilders such as Toll Brothers (NYSE:TOL), KB Home (NYSE:KBH) or Lennar (NYSE:LEN) have doubled over the last 12 months on some signs that the real estate market has turned.

Currently, 10% of the homebuilder shares have been sold short. This is three times the rate of the Russell 3000 index. For example, there is currently a 28% short interest in KBH.

KBH recently reported strong revenue growth in the third quarter of 16% over the same period last year. The company generated a net income for the quarter of $0.04 a share as compared to a loss of $0.13 a share for the prior year. However, investors were most impressed that the backlog grew substantially. KBH ended the quarter with $745 million in potential future housing revenues, a 33% increase over the prior year and the highest third quarter backlog level since 2008.

Nonetheless, the bears continue to bet against homebuilders.

Recently, a top analyst poured water on the homebuilding stocks.

“The case we were making, actually, in our report is that the U.S. housing market was actually going to continue to roll along. In fact, because we think we see supply constraints actually starting to develop, we actually think home price appreciation is going to exceed what most people think,” said Barclays analyst Stephen Kim.

Rating: 4.5/5 (4 votes)


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