If it was a boxing match, the referee would have already called it off. Homebuilder stocks have been so battered in recent months that the spectacle is bordering on gruesome, with the sector still down about 50 per cent from its recent highs, in spite of a slight rebound.
But the markets have no mechanism for sympathy, so the beating continues. This is so much so that as such stocks enter deep-value territory – fetching prices that are near (or even below) book value, with price/earnings ratios often in the low single digits – some fund managers are tempted by what they see.
“A lot of value investors are looking at the group,” says William Mack, equity analyst at Standard & Poor’s, pointing out that investing legends such as Ron Muhlenkamp and Legg Mason’s Bill Miller have dabbled in Centex, one of the biggest builders in the US. “But housing is a very long-cycle business, with issues that take several quarters to work through, if not years. That’s why valuations have really been taking a hit.”
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But the markets have no mechanism for sympathy, so the beating continues. This is so much so that as such stocks enter deep-value territory – fetching prices that are near (or even below) book value, with price/earnings ratios often in the low single digits – some fund managers are tempted by what they see.
“A lot of value investors are looking at the group,” says William Mack, equity analyst at Standard & Poor’s, pointing out that investing legends such as Ron Muhlenkamp and Legg Mason’s Bill Miller have dabbled in Centex, one of the biggest builders in the US. “But housing is a very long-cycle business, with issues that take several quarters to work through, if not years. That’s why valuations have really been taking a hit.”
Read the complete article
