Use access key #2 to skip to page content.

chimpcontest (< 20)

3. Chimp Contest Leader Board, Humor and Homebuilders

Recs

54

July 19, 2010 – Comments (16) | RELATED TICKERS: ITB , SPF , MDC

Chimpcontest End Date

The chimpcontest will end at 4pm Sept 10th, 2010 (no after hours trading).  This will mark the first home closing of the Floridabuilder era.  I highly doubt the buyer will walk from their deposit and even if they did, I will still honor Sept 10th as the end of the Chimp Contest. 

I'm looking forward to mailing out that whopping $500 check to some brilliant investor.  The stock picking ideas in the chimpcontest far exceded my expectations.  I'm already underperforming the SPY by negative 500 points.  Why pay for Motley Fool news letters when the chimpcontest provides you 100 free BEST picks!!!   

Additionally, I am relying on the winner to properly claim their prize to the IRS.  Many of you seem very much concerned about the level of government debt in the US.  What better way to put your money where your mouth is, but to pay taxes on the winnings of this contest.  I am confident that the government will have a balanced budget next year as more of you patriots find ways to pay more in taxes.

Chimpcontest Leader Bored

Yes, I know how to spell board.  However, the chimpcontest has been anything but exciting given that very few picks have even managed to outperform the SPY by 30 points.  However, we have a new leader and I felt that now was a good time to give a contest update in addition to homebuilder chatter.

#1 ARNA - Donerv pick.  Arena is a pharma company that makes fat people thin.  You don't have to exercies, you don't have to eat healthy, you just take a magic pill.  Just like the magic shoes in Forrest Gump.  You can tell an awful lot about a person by the shoes they wear.  Just like you can tell an awful lot about a society that looks for magic pills to correct their self induced medical problems.  For that I give Donerv a green thumb for finding a stock that capitalizes on America's laziness. 

#2 PANL - HP2006 pick.  First of all HP sucks.  My HP laptop always ran hot for two years and finally burnt out 3 weeks ago costing me a lot of time and effort to replace that piece of crap.  However, we are not here to discuss HP's inability to produce lap tops that need dual fans to keep cool we are here to discuss PANL, #2 in the chimpcontest.  In reading the Motley Fool comments section, PANL is another (breakthrough) company with cutting edge technology.  Oh, that loses gobs of money.  PANL is a high tech company in New Jersey?  Way to locate on the wrong continent and in the wrong state.  The fact that our #2 stock is a money losing tech company from New Jersey says it all.

#3 WEL - TDRH pick.  Haliburton said they would buy WEL for $3 a share which means the upside is 3 cents, since it is currently trading at $2.97.  I think this is the perfect arbitrage play.  Buy at $2,97, sell at $3.00.  Do this thousands of times a day until the deal is closed.  You will be worth millions.  I can't believe I'm the only one not thinking this?  Bueller? 

#4 KRO - Generaldemon pick.  KRO's average daily volume is 7,800 so that is the first tell that we are onto a hot stock you want to get into.  The last MF community comment on this MUST BUY stock is chimpcontest on March 23.... where I declared "Generaldemon pick".  The chimpcontest proves that a low volume stock can outperform 95% of stocks and it is outperforming the SPY by 39 points.  96% of the shares are held by insiders per Yahoo.  Based on the volume, no one is selling

#5 TAL - whereaminow pick.  I'm not sure what whereaminow means?  I'm thinking it is Apache or Blackfoot?

Running River:  ugh.  Clouds hide sun, cool breeze

Dancing Bear: Rain in air, thunder sky, whereaminow

Running River: whereaminow

In reading the Motley Fool description of TAL, I'm thinking Ponzi scheme?

Motley Fool description - The Company is a lessors of intermodal containers and chassis. Its operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal equipment.

Sales Director:  Tom, we are going to buy this chassis, then lease it to company Y and then release it to company Z.  Once all leases are signed then we sell the chassis to company A at a discounted rated and they service the contracts.

Tom: When do I get my commission check?

Floridabuilder's Homebuilder Spring 2010 Guarantee

Rarely on my FB blog did I give guarantees.  Well, actually I did all the time...

On March 29th, the Motley Fool posted the following write-up (Homebuilder implosion 2) which landed on the Yahoo Finance news wire.  Unfortunately, bad people who I don't want identifying me started going through all my past Floridabuilder blogs and I had to ask Motley Fool to delete three years worth of hard work. 

The point of the article on March 29th was that when all the analysts, public builder CEO's and talking heads back in late March were telling you everything was fine in homebuilding I was seeing and hearing the exact opposite.  Not only from the vast amount of data I collect on public homebuilders but from the executives who work under the lying CEO's.

I saw a SIGNIFICANT drop off coming in the industry.  This is why YOU NEVER trust what a CEO says.  The blantant lies that were be stated everyhwere this past Spring forced me to open up more than I wanted to about the Summer bust I saw coming.  Which basically shut Floridabuilder down.

Not only did I warn in that article, but I also dedicated a whole blog post making a 100% guarantee that shorting builder stocks offered a zero percent chance of being wrong.  Additionally on March 10th I red thumbed the homebuilder ETF (ITB) and promised 6 months of arse whooping.  Seriously, I don't know how much flag waving I could have down to warn you to get out of builder stocks or get you to short builders this past Spring.

If you look at any builder stock from March until now it looks like a poop stain running down the back of your underwear.  I'm talking the kind of stain that you get because there isn't enough toilet paper in the Taco Bell and your next stop is 3 hours aways in a car with no air conditioning.  That type of slope angle! 

Just because I have taken down Floridabuilder blogging and don't blog as frequently under chimpcontest doesn't mean I am not wired into this industry.  I'm actually tracking builders moves and homebuilding more than any time in the last 3 years. 

I never give my opinion, I only give facts before the market recognizes the sea changes.  For most builders there is not a lot of downside left on their stocks UNLESS the overall market has a nasty correction.  I am counting on a nasty correction, because I want to buy one of the builder penny stocks when everyone else is running for the hills.  We aren't there yet, but getting close.

Where Are We Heading In Homebuilding?

If you are a trader or an investor in builder stocks some time in the next two months will provide you a great entry point to go long.  The biggest issue right now is that the overall market can take builder stocks to significantly lower levels, so you have to take that into consideration.  I want to continue to emphasize that fact because it is important.  

Right now public homebuilders operationally are in a free fall as the data is really really bad.  Bad news = bad stock price action.  However, we are getting closer to an oversold position and there are a number of things builders will have going for them this Fall and beyond.

1) The public builders have decided to hide their bad assets, so I would be shocked if you see any more big ugly write downs.  Instead, they will bring those write-offs out seveal years down the road when Wall Street is focused on earnings and not book value as it relates to builder stocks.  Only a totally incompetent management team is going to write down assets now.  Most management teams have figured out how to manipulate the Accounting rules so as to not alarm investors. 

2) Private builders are dying everywhere and these deals (finished lots) are going to the banks or private equity and then coming back out to public builders.  For the most part public builders are buying lots at a 20% gross margin and 30% IRR.  Those are strong numbers and in a normalized time these stocks would skyrocket with those numbers.  So what is missing?  sales pace.....  Public builders are still not garnering the sales pace per community to push SG&A expenses down.  For those of you who are slow witted, spreading more revenue over fixed costs is a good thing.  Today that is not happening.

Nationally, we are on a pace of about 400,000 new homes, plus or minus.  We need to be at about 800,000 new homes annually to see public builders maximizing their valuations.  400,000 new homes means barely above break even except for the leanest builders.  So pay attention to new home permits, closings.... and not EXISTING HOMES.  Existing homes is irrelevant.

3) Sales price doesn't matter.  I laugh when people say home prices are falling and to avoid builder stocks... Hey stupid.....  input costs are falling faster.  How else do you explain that home prices have fallen 50% in many areas where publics build yet they are still able to get NEW deals at 20%  gross margins.  Thank God Obama is protecting illegal immigrants who work hear for peanuts and a bowl of soup.  Otherwise we would have problems.  As long as illegal immigration is unresolved the industry can still take full advantage of keeping Americans unemployed and paying illegals sub-standard wages.  Even I wouldn't turn away an illegal when my competition isn't either. 

If you are a trader consider SPF, HOV or BZH...  only buy when the market is really getting killed and these stocks are hitting 52 week lows.  None of these stocks are in jeopardy of going bankrupt in the next 2 years, so that is a non-issue of the stock going to zero.  They all have the potential of being a quick double in 3-6 months.

For long term investors of 5 years...  Buy MDC, MTH or MHO...  wow they all start with the letter M, just like the word Magic!  Each of these builders are not weighed down with hidden future write-offs and their land acquisition strategies are superior to the rest of the industry.

It's not Unemployment!!!!

I tend to repeat myself because as Tony Robbins says "repetition is the mother of skill"  Wait, I have to use the bathroom I'll be back in 5 minutes... #2

Sorry, false alarm just a little gas.  This is what makes my blog cutting edge.  It's real time, like your sitting right next to me or on my lap.

Where was I?  Ah yes, Tony Robbins.  I tend to quote people you don't respect like Tony Robbins, H. R. Puffenstuff, FDIC officials, because people have memories of negative things in their life.  Remember, the movie Carrie?  She only remember the negative things like the period in the shower or the pigs blood being dropped on her.  This is why I tend to be a blow hard on my blog or quote idiots because you'll remember it.

It is not unemployment!!!!!!!!!!!!!!!!  This entire mess was a result of overbuilding homes, residential housing, housing valuations, residential mortgages, etc...  I don't want to hear about national debt, credit card debt, import/export, unemployment rates, etc...

The economy will not heal until residential housing heals.  Period.  National debt is down the road, right now it is housing.  What will be the sign or indicator that housing is healing?  New homes being built need to work their way up to 1.2 million.  This is going to take 5 years at least.  Sales prices are in a bottoming phase, it is all about sales volume.

Pay extra attention to new housing starts, permits, etc...  Really understand these indicators.  When they begin to heal, then the stock market and economy will heal.  If residential RE is healing then that means commercial RE is healing.  As I said many times before... drive around your city and what do you see?  Everywhere are homes and real estate.  If you think the economy is driven by anything but real estae you are sadly mistaken.  Real estate and the leveraging of our real estate is what gets us into and out of economic problems.  Our countries wealth has grown due to demographics which drives new real estate and the structural transporation and utilities that support the demographics.  This is why zero population growth countries are so scared.  US demographics show a continued population growth which will feed more real estate projects and move the economy forward.

Seacrest Out 

(I stole that from Ryan Seacrest) 

16 Comments – Post Your Own

#1) On July 19, 2010 at 3:45 PM, ocsurf (< 20) wrote:

Welcome back my friend!

Report this comment
#2) On July 19, 2010 at 4:23 PM, floridabuilder2 (99.34) wrote:

Back in Black....  Real tired burning the candle at both ends.  Hopefully not a lot of grammer and spelling errors above.  I think I recently read a blog where someone was complaining about there and their, etc...  who has time to proof read!

Report this comment
#3) On July 19, 2010 at 4:41 PM, belfairinvestor (29.37) wrote:

Fb/chimp-

I have a REO note held by the FDIC from a bank seizure. In your experience is FDIC willing to settle small (100k) notes with individuals? Will they negotiate a discount cash sale? Thank you from a small builder.

Report this comment
#4) On July 19, 2010 at 4:49 PM, ocsurf (< 20) wrote:

"If you look at any builder stock from March until now it looks like a poop stain running down the back of your underwear.  I'm talking the kind of stain that you get because there isn't enough toilet paper in the Taco Bell and your next stop is 3 hours aways in a car with no air conditioning.  That type of slope angle!"

A definate case of monkey butt...no pun intended :)

Report this comment
#5) On July 19, 2010 at 5:06 PM, leohaas (34.97) wrote:

Great to finally read something by you again!

Just one quote and a follow-up question: "So what is missing?  sales pace....."

Considering the number of homes already in foreclosure, the number of foreclosure notices going out right now, and the rumor that banks are deliberately slowing down foreclosures because the pipeline is full (in other words: a tremendous pent-up supply), who would need a newly built home in the foreseeable future? I mean, other than snobs like me and my wife who are willing to pay extra to get exactly what they want, and don't want to deal with all the troubles that come with a short sale or buying a foreclosed home?

Or to summarize: how do we get from the current rate of 400k to about 1.2M in 5 years?

Report this comment
#6) On July 19, 2010 at 5:50 PM, anchak (99.85) wrote:

Ah ! What a pleasant surprise - I have become extremely infrequent here also FB - so to come today and see your post -

Well put a smile to my face :)

Hope you are doing great !

A pleasure as always 

Report this comment
#7) On July 19, 2010 at 6:15 PM, floridabuilder2 (99.34) wrote:

belfair,

I doubt it...  The FDIC seems to be more interested in large package deals like Amtrust (which I helped bid on for a losing team!!).  I have bid on REO (not notes), but it is such a cluster-Fk and it is like the whole world knows about the deal so you are paying market.  You can try to buy notes from the FDIC, but you will have more success working with banks.  Also, I am 90% positive that if a bank is in trouble and you have a purchase agreement to buy a note or REO that the contract is null and void if the bank goes under.  So before you spend due diligence money you want to make sure that the bank is at least alive for the due diligence period.

leohaas,

new home prices are going for about a 15% premium to foreclosures as a rule of thumb in good areas.  Industry wide I think most salespeople will tell you that the reason why they can sell a house is because the process of buying a foreclosure is so difficult they give up.  Most people do not have the luxury of just buying a house "whenever".  They are selling their home or their apartment rental agreement ends or they move to a new city.  So it is sort of like why is someone buying a Monster at a gas station for $3.00 when the grocery store it is $2.25?  Convenience "no hassles".

The banks will bleed out these foreclosures over 5 years and pure demographics will push up the new home sales over that time.  Theoretically we need 1.2 million new homes a year.  So if you have 400k new then you have 800k foreclosures soaking up the rest, next year you are at a 500k/700k ratio and so on...

 Anchak,

Life keeps me busy.. that is the only reason not a frequent blogger... hope all is well

Report this comment
#8) On July 19, 2010 at 6:25 PM, TDRH (99.75) wrote:

Congratulations on the close!   Wish it had happened sooner.

You have always said that Real Estate is Regional and that noone makes money building houses in Texas.   You also mentioned areas close to water recover faster.  That said which company(s) are best poised for you anticipated bounce?

At a macro level I do not believe there is a rebound in the cards, but I have been wrong before.  About the time the market starts to level out, interest rates will rise  and the homebuilders will be in a bind again.

 

 

Report this comment
#9) On July 19, 2010 at 7:52 PM, binve (< 20) wrote:

congrats FB!

Report this comment
#10) On July 19, 2010 at 8:37 PM, floridabuilder2 (99.34) wrote:

TDRH, there is not a rebound in the cards on a macro level so you are right.  However, homebuilding stocks with huge short positions offer a lot of volatility and that is always good for patient traders that are willing to wait months for a well timed buy.  SPF is loaded up in California and they are in the penny stock range so I like them under $3.  It is really a matter of how low they go and that will be determined by the overall market.

Binve, congrats back!!!

Report this comment
#11) On July 19, 2010 at 10:27 PM, whereaminow (40.41) wrote:

I can't think of a better honor than being parodied in a floridabuilder blog.  As for TAL, it was severely undervalued (and moving in the right direction) when I picked it.  It's probably settled into its new trading range now.  Very little upside left.  Oh well.

Great post all around. Always enjoy hearing from you.

David in Qatar

Report this comment
#12) On July 20, 2010 at 12:28 PM, engstocker (< 20) wrote:

Floridabuilder, gun to your head, which builder stock do you like best longterm, say you were going to add it to your IRA soon.

Report this comment
#13) On July 20, 2010 at 1:07 PM, floridabuilder2 (99.34) wrote:

engstocker... MDC hands down....  long term only... short term it has little downside, but I also don't know how quickly it will rebound.  Tons of cash and very aggressive land strategy that will help the bottom line

Report this comment
#14) On July 21, 2010 at 12:55 PM, leohaas (34.97) wrote:

Thanks for the explanation. I am definitely in the group that is willing to pay extra to avoid the troubles associated with buying a foreclosed home. I'll be tracking the number of foreclosures for the next several years to see if your prediction is correct. I sincerely hope you are...

Report this comment
#15) On July 27, 2010 at 2:21 PM, MLGtrader (99.23) wrote:

Do you stil see a major correction coming to knock the builders down to a good buying level?  Thanks!

Report this comment
#16) On July 31, 2010 at 12:26 AM, tomlongrpv (78.64) wrote:

"If the only tool you have is a hammer, the whole world looks like a nail." 

Ancient homebuilder motto.

Report this comment

Featured Broker Partners


Advertisement