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$13.57 -1.04 (-7.12%)
10/6/2008 4:08 PM

Centex Corp (CTX)

CAPS Rating:
*

The Company is focused on residential and commercial construction and related activities, including mortgage financing. Its subsidiary companies operated in three principal business segments: Home Building, Financial Services and Construction Services.

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Avatar NakoQuant (89.00) Submitted: 9/23/07 3:48 AM : Underperform Start Price: $33.52 CTX Score: 31.82

Housing downturns in America run an average of around 7 years in the U.S, following periods of appreciation. The bubble we just experienced is unlike any in modern history. It will take much longer (or be much worse for a short period of time) to recover from this bubble than in prior bubbles. Q.E.D.

With only ~$1 billion in cash, I doubt CTX will have the fortitude to withstand a 7+ year housing downturn. Conventional valuation makes this a no-brainer: 55 forward multiple for a company in a contracting market? And don't forget that ~90% of CTX's assets are in its inventory. The inevitable markdowns (there will be more than one over the next few years) of the value of this inventory will make this look like an even more foolish (not Foolish!) holding. Get out now.

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