Investors – A Fresh Look at the Home Building Sector

The world is just a complete mess. Europe is teetering on the brink of deflation and is forced to initiate a QE program. Russia and Ukraine are battling it out for supremacy. ISIS terrorists are roaming the world for conquests. Japan is in a recession. China’s economy is slowing down. The only beacon of light is the United States. By all accounts our economy is in great shape. The latest jobs report was a smash hit. We added 257,000 new jobs in January. November and December jobs were revised upward to 414,000 in November and 329,000 in December. This is the 11th straight month of jobs numbers above 200,000. For the past three months we’ve added an average of 336,000 jobs. Weekly wages have risen 12 cents per hour. Consumer confidence is the highest in a decade. Car sales were up 14% in January. With all this good news what we’ve seen in January is a choppy market reacting to the highs and lows of international events and the sharp drop in oil prices. However, tucked in the jobs report is an interesting set of statistics. It has to do with the housing sector.

Low interest rates are stoking a recovery in this beaten down sector. What we have are strong jobs numbers here. Residential Construction Workers added 12,500 jobs. This is the biggest increase since 2002. Building Materials added 3,700 jobs. Wood Products Manufacturing added 4,100 new jobs. Specialty Trade Contractors added 7,600 jobs. Even Real Estate added 4,400 jobs.

We are looking at two sectors in this group: Building Residential-Commercial and Building Products Retail-Wholesale. These are the top five companies in each group by Weighted Alpha.
Building-Residential-Commercial
Lennar Corp (LEN) Recent Price $48.02 52 Week High/Low is $48.52/$35.74 EPS is $2.81 PE ratio is 16.53 Dividend is $.16 (.34%) Market Cap is $9.85 B
DR Horton (DHI) Recent Price $26.49 52 Week High/Low is $26.89/$19.19 EPS is $1.54 PE ratio is 16.74 Dividend is $.25 (.97%) Market Cap is $9.68 B
Pultegroup (PHM) Recent Price $22.26 52 Week High/Low is $23.28/$16.56 EPS is $1.24 PE ratio is 17.32 Dividend is $.32 (1.49%) Market Cap is $8.25 B
NVR Inc (NVR) Recent Price $1,315.11 52 Week High/Low is $1,355.09/$1,027 EPS is $64.27 PE ratio is 20.06 Market Cap is $4.05 B
Ryland Group (RYL) Recent Price $43.34 52 Week High/Low is $46.67/$30.33 EPS is $3.10 PE ratio is 13.74 Dividend is $.12 (.28%) Market Cap is $2.00 B
Toll Brothers (TOL) Recent Price $36.40 52 Week High/Low is $39.95/$28.92 EPS is $1.80 PE ratio is 20.04 Market Cap is $6.B
Building Products-Retail-Wholesale
Lowes Companies (LOW) Recent Price $71.90 52 Week High/Low is $72.25/$44.13 EPS is $2.52 PE ratio is 28.36 Dividend is $.92 (1.29%) Market Cap is $70.97 B
Home Depot (HD) Recent Price $109.04 52 Week High/Low is $109.74/$74.61 EPS is $4.40 PE ratio is 24.77 Dividend is $1.99 (1.72%) Market Cap $143.70 B
Jewett Cameron Trading Company (JCTCF) Recent Price $10.88 52 Week High/Low is $11.68/$9.09 EPS is .65 Market Cap is $28.18 M
Tecnoglass Inc. (TGLS) Recent Price $10.10 52 Week High/Low is $15.00/$9.40 EPS is $.51 PE ratio is 0 Market Cap is $246.44 M
Fastenal Company (FAST) Recent Price $42.33 52 Week High/Low is $52.21/$40.18 EPS is $1.67 PE ratio is 25.19 Dividend is $1.12(2.66%) Market Cap is $12.55 B

January 2015 – Turbulence Rules the Markets

Some market watchers hold that January sets the tone for the rest of the year. If this January is any indication we are in for a bumpy ride. The markets have reacted to cross winds both international and domestic.Continue Reading

The Election in Greece: Syriza Party’s Stunning Win

It was to be a grand thing, this Euro. It was the water that would raise all the boats of each European country and for 10 years it did just that. The headquarters was set up in Brussels. A troika would rule. It was the European Commission, The European Central Bank (ECB) and the International Monetary Fund (IMF). Each country could issue its own bonds. Interest rates fluctuated based on the relative economic strength of each country. Germany with its strong industrial capacity and exports rose to the top. The Southern countries of Greece, Spain, Portugal and Italy lacked the exports. Instead they relied on the money from their bonds to put people to work in the public sector. What no one realized at the time was that all the new debt being issued would eventually need to be repaid in Euros, not their old currency. This inflated the debt.Continue Reading

Trading Woes on Black Thursday: January 15, 2015

Picture this. You are a very good trader, trading mainly with technical indicators. You use such tools as charts, Bollinger Bands, support and resistance, slow stochastic, money flow and several other indicators. These skills have served you well and you have a successful 10 year track record. You like the leverage of trading commodities and currencies. Currencies offer the greatest leverage, requiring only a 2% margin. That means that you put only $2.00 down for every $100 you trade. You are rather conservative and even though you have a $10,000 account you trade only $2,000. With a $2,000 margin at 2% you are controlling $100,000 of currencies. You are trading $2000 of EUR/CHF. Currencies are always spread trades. In this case you are buying the Euro (EUR and selling the Swiss Franc (CHF).Continue Reading

A New Focus: Greece is Under the Microscope

Focus is changing to Europe. Events are happening there at lightening speed. From the recent assassinations in Paris to Greece and to Brussels, the headquarters of the Eurozone. So – let’s take a closer look. Continue Reading

2015 – How is the World Doing?

It might be helpful to take a reading on various countries at the beginning of 2015 to help investors decide where to place their bets in the coming year. Some trends are affecting all major world economies while others are country specific.Continue Reading

How Producers and Suppliers are Coping with the Oil Crash

We all knew that there was an oil glut several months ago. US oil production is the highest in three decades. US crude stockpiles climbed 7.27 million barrels in the week ending December 19. This brought the gain to 387.2 million barrels. But the wild card was Saudi Arabia and OPEC. In previous periods of oversupply, OPEC has cut production. This time they dropped a bombshell and said NO to cutting production, that they would pump 30 million barrels per day. OPEC supplies 40% of the world’s oil. This caught the energy market by surprise. Where Brent crude was trading at $111.05 per barrel in June, it plunged more than 50% to $59.45 per barrel in the February futures contract. WTI crude closed at $54.73. The impact on producers and suppliers is creating a crisis of monumental proportions. Producers, oil- rig operators and manufacturers, refineries, and natural gas producers are all getting hit. The US dollar has been trending higher with a close on Friday December 26, of 90.31 for the March futures contract. Commodities usually take a beating with a stronger dollar. Let’s examine the impact of the oil crash on key oil exporting and importing countries.Continue Reading

Get Ready for Toyota’s New Fuel Cell “Mirai.”

The auto industry is in the midst of a revolution not seen since the invention of the internal combustion engine. Toyota has been the undisputed leader in developing new automotive technologies. Fifteen years ago, Toyota introduced the Prius, the first of its hybrid gas-electric vehicles. Now, every manufacturer has multiple hybrids coming online.Continue Reading

Big Banks Win – Derivatives are Back

Once upon a time in the long ago we had banks that lent money to individuals and companies to expand and grow the economy. During the Great Depression lawmakers saw the need to rein in and regulate banks’ activities. The Glass Steagall Act of 1933 ruled that banks could not become involved in selling or trading securities. Separate Investment banks were organized that could underwrite and sell securities but they could not use depositor money.Continue Reading

Oil Price War – Saudis up Ante Cutting Prices Another $2.00 Per Gallon

The State owned company Saudi Aramco announced that it is cutting prices to a record low $2.00 per barrel discount to Asia, Europe and all grades of crude to US refineries. To reinforce Saudi Arabia’s vow to crush US oil shale producers, Saudi prince, Turki Al-Faisal said: “Saudi Arabia won’t give up oil market share at this time for anybody.”Continue Reading