Why Loeb Cut Exposure to Netflix, Microsoft, and Alibaba in Q4
In its third-quarter letter to investors, Third Point told investors that it reduced its “tech exposure meaningfully.”
Is Amazon Ready for Comcast’s Smart Home Challenge?
In the United States, Amazon’s (AMZN) Echo devices make up 63% of the smart speaker market, according to Strategy Analytics.
A Glance at Key Updates in the Consumer Sector
So far in 2018, the S&P 500 Consumer Discretionary Index has risen 13.7%, outperforming the S&P 500 Index’s rise of 3.9%.
Amazon Looks to Expand in the Smart Home Market with Lennar
Amazon is partnering with homebuilder Lennar to bring its home automation products powered by its voice assistant to Lennar smart homes.
Why a Rebound in March Housing Starts Isn’t Satisfying the Sector
The volatility in housing starts data remains elevated. Housing starts in March were reported to have risen 1.9%.
Top Gainers in the Consumer Sector Last Week
Florida-based Lennar (LEN) released its fiscal 1Q18 results on April 4, 2018.
How US-China Trade Tensions Have Affected the Consumer Sector
US-China trade war tensions continued to affect the consumer sector last week.
What’s behind the 7% Fall in February Housing Starts?
Just as markets were celebrating the stellar 9.7% increase in housing starts in January, the February data proved to be a damper for that enthusiasm.
Key Events for Consumer Stocks: February 12–16
On February 5, Jefferies upgraded Lowe’s (LOW) to “buy” from “hold” and raised the target price to $129 from $81.
Households Think It’s a Good Time to Buy a Home
According to the latest report from NAR, existing home sales have risen 2% to a seasonally adjusted annual rate of 5.48 million in October.
Housing Market: What a Rise in Building Permits Signals
In October 2017, building permits were at a seasonally adjusted rate of 1.297 million—an increase of 5.9% from the reading of 1.225 million in September.
Analyzing Housing Starts in October 2017
In October 2017, housing starts rebounded sharply from the slump in September. October housing starts beat the market’s expectations.
Is the Drop in September Building Permits Cause for Concern?
In September 2017, building permits were at a seasonally adjusted annual rate of 1.215 million—a fall from August’s 1.272 million and 4.3% below September 2016.
The Truth about Housing Starts in September 2017
In September 2017, US housing starts fell from an upwardly revised August number of 1.183 million to 1.127 million units—a negative surprise.
Could Equity Valuations Pick Up in a Lower Interest Rate Environment?
According to Morgan Stanley Private Wealth Management’s Andy Chase, long-term fundamentals look strong with the recent pickup in economic activity.
Why the subdued Consumer Price Index gives the Fed an excuse
This report will probably hold the hawks on the Fed at bay and allow them to continue to maintain ultra-low interest rates. That said, the bond market has been pricing in a tapering of quantitative easing.
Homebuilder Sentiment Improved in August
The NAHB Wells Fargo Housing Market Index, which measures homebuilder sentiment, peaked at 71 during the height of the housing bubble in late 2005. It bottomed out at 8 in early 2009.
Did Housing Starts Rise Again in July?
In July, the Northeast saw housing starts jump from 116,000 to 134,000, while starts rose from 171,000 to 175,000 in the Midwest.
Why Did Foreclosure Completions Rise in June?
In June, the total foreclosure inventory fell 26% from a year ago to 375,000 homes. This works out to be about 1% of all homes with mortgages.
Job Cuts Rose in July but Fell Sharply on an Annual Basis
Planned job cuts rose 19% in July compared to June. However, they fell 57% YoY (year-over-year) in July.
Investor Takeaways from the July ADP Non-Farm Payrolls
ADP published the ADP non-farm payrolls for July on August 3. It acts as a prelude to the Bureau of Labor Statistics’ Final NFP (non-farm payroll) numbers.
Construction Spending Fell in June
In June 2016, private construction fell 0.6%, and public construction fell 0.6% month-over-month.
How the Hot Rental Market Contributed to Housing Starts
In June 2016, housing starts rose from 1.1 million to ~1.2 million. We also saw increases in both single-family and multifamily starts.
For Now, D.R. Horton Avoids Fallout from Declining Energy Prices
D.R. Horton (DHI) reported net income of $294.8 million, or $0.66 per share, for 3Q16.
Why Wage Inflation Could Be Picking Up
Given the terrible growth in payrolls, we might see more flattening of wage inflation back towards the current inflation rate.
June Payrolls Rebound after a Dismal May
In June 2016, non-farm payrolls rose by 287,000. Non-farm payrolls easily topped Wall Street analysts’ estimate of 180,000.
Can Investors Keep Forecasting the Final Non-Farm Payroll Correctly?
ADP’s June non-farm payroll numbers indicated an increase of 172,000 jobs in the private sector. ADP’s non-farm payrolls have been mostly accurate.
Mortgage Purchase Applications Fell Last Week
Mortgage purchase applications fell 3% in the week ending June 24, 2016. We’re at the tail end of the seasonally strong period for house purchases.
What Happened to KB Home’s Earnings in 2Q16?
KB Home’s net income came in at $15.6 million on a GAAP (generally accepted accounting principles) basis, as compared to $9.6 million in 2Q15.
KB Home Just Reported Strong Revenue Growth for 2Q16
For 2Q16, KB Home reported revenues of $811 million, which easily topped the Wall Street estimate consensus of $750 million. Revenues increased by 30% YoY.
Lennar’s Gross Margin Falls, but Guidance Remains for 2016
In 2Q16, Lennar’s (LEN) gross margin rose 40 basis points sequentially to 23.1%. In 2Q15, the company’s gross margin was 23.8%.
FOMC Meeting Is the Highlight of the Week Ahead
This week contains some important data with housing starts, industrial production, and retail sales. The FOMC meeting will be the highlight on June 14 and 15.
Average Hourly Earnings Rose in May
Aside from employment, the most important indicator of economic well-being is wages.
May Payrolls Were Exceptionally Weak
In May 2016, non-farm payrolls rose by 38,000, which missed Wall Street analysts’ estimate of 160,000 by a wide margin.
Do US Economic Indicators Support a Rate Hike?
US economic growth was revised to 0.8% in the second reading of GDP for 1Q16 compared to the previous month’s 0.5%.
US Stock Indexes Rose as the US Economy Recovered
Upbeat new home sales data boosted investors’ sentiments about US economic recovery, causing US equity indexes to rise from May 17 to May 24, 2016.
Did Toll Brothers’ Earnings per Share Rise in Fiscal 2Q16?
After Toll Brothers reported fiscal 2Q16 earnings on May 24, 2016, its stock rose by $2.41 to close the day at $29.51.
Is Pricing Growth Stalling for Toll Brothers?
Toll Brothers (TOL) reported that its ASP (average selling price) for fiscal 2Q16 was $855,500, a drop of 2% on a quarter-over-quarter basis.
Why Did Treasury Yields Rise Last Week?
US Treasury yields rose across the yield curve for the week ended May 20, 2016. This came as minutes of the FOMC April meeting raised the probability of a rate hike in June.
Behind Homebuilder Sentiment So Far in May
The NAHB Wells Fargo Housing Market Index measures homebuilder sentiment has been increasing steadily since 2009. Recently, it’s started to accelerate.
The Truth about Housing Starts in April 2016
In April 2016, housing starts rose from 1.1 million to ~1.2 million, which was above Wall Street analysts’ estimate of 1.1 million.
Analyzing the New Deal: Do We Need a New One?
Historically, the use of public construction dollars has been the big lever that the government uses to stimulate the economy. This dates back to the New Deal.
Where’s the First-Time Homebuyer?
In March, the share of existing home sales attributable to the first-time homebuyer was 30%—flat with February. Historically, this was closer to 40%.
Construction Spending Rose in March: What Does It Mean?
Construction spending rose to a seasonally adjusted annual rate of $1.14 trillion in March from $1.13 trillion in February. Spending rose 8% YoY.
D.R. Horton Reported Steady Gross Margins
D.R. Horton (DHI) has been reporting lower gross margins due to sticker shock. Home prices have been increasing, but wage growth has been stagnant.
Analyzing D.R. Horton’s 2Q16 Revenue: It’s a Strong Start!
D.R. Horton reported 2Q16 revenue of $2.7 billion—a 16% increase on a YoY basis and a sequential increase of ~14%. The revenue beat analysts’ expectations.
Why PulteGroup’s Founder Wants to Fire the CEO and Lead Director
Over time, Pulte has lifted its gross margins and improved revenues. However, the stock has still lagged its peers, especially the S&P SPDR Homebuilder ETF (XHB).
Why Did the First-Time Homebuyer Step Back in February?
In February, the share of existing home sales attributable to the first-time homebuyer was 30%—down 2 percentage points from January and up 1% YoY.
Wages Are Increasing 2.3% per Year: What Does That Mean?
Employment and wages are key indicators for the Fed Aside from employment, the most important indicator of economic well-being is wages. Despite falling unemployment, one of the conundrums facing the current labor market is flat real or inflation-adjusted wages. Over the past decade, wages have more or less kept pace with inflation, but they haven’t increased. Before the financial crisis, much of […]
What Does the Fed’s Preferred PCE Data Indicate?
The PCE Index is the Fed’s preferred inflation measure and has important policy implications. The latest data shows that the inflation is running below the Fed’s 2.0% target.
Why Lennar’s Focusing More on First-Time Buyers
In the second quarter, Lennar’s (LEN) gross margins fell 190 basis points sequentially to 22.7%.
Housing Starts Rise as the Spring Selling Season Begins
Housing starts rose from 1.12 million to ~1.18 million in February 2016. This was above Wall Street analysts’ estimates of 1.5 million.
Why the FOMC Meeting Will Dominate the Week Ahead
This week has important economic data and the FOMC meeting. The markets are predicting a 15% chance that the Fed will raise the federal funds target on March 16.
Foreclosure Completions Ticked Up Slightly in January
Foreclosure completions rose by 5,000 units to 38,000 in January, according to CoreLogic. From 2000 to 2006, foreclosure completions averaged around 21,000 per month.
What Economic Data Will We See This Week?
The week after the jobs report is usually very data-light, and this week is no exception. None of the economic reports this week will be market-moving.
Limited Supply: Analyzing Housing Starts and Household Formations
There was a big fall in household formation in 2008. In 2005, household formation peaked at 1.9 million. By 2008, that number was just over 400 million.
Weak Domestic Data: How Was the US Dollar Affected?
The US Dollar Index, which measures the strength of the US dollar against other major currencies, was trading on a flat note on February 29, 2016.
Existing Home Sales Were Flat in January: Here’s Why
The ratio of median home prices to median income ratio is 3.9x, well above the historical range of 3.2x to 3.6x.
Why Toll Brothers Has Reported a Drop in Earnings per Share
For fiscal 1Q16, Toll Brothers’ earnings were $73.2 million, or $0.40 per share, down from its net income of $81.3 million, or $0.44 per share, a year ago.
Treasury Yields Rise on Upbeat Consumer Inflation Data
US Treasury yields rose across the yield curve after upbeat consumer inflation data suggested that the Fed may hike interest rates earlier than expected.
US Dollar Index Ends Positive for the First Time in the Week
The US dollar index, which measures the dollar against other major currencies, was trading on a negative trajectory in the week ending February 12.
Is It Done Yet? Foreclosure Inventory at November 2007 Levels
Foreclosure completions fell by 1,000 units to 32,000 in December. Completions fell 23% year-over-year. However, 33,000 is still a relatively high number.
Why Did the US Dollar Index Continue to Fall?
The US Dollar Index measures the strength of the dollar against other major currencies. It continued its downward trajectory on February 4, 2016.
US Dollar Index Fell Sharply as PMI and Fed Ran the Show
The US Dollar Index, which measures the strength of the US dollar against the other major currencies, fell below 97 on February 3. It hit a low of 96.9 before ending the day at 97.3.
Treasury Yields Fall on Bank of Japan’s Negative Interest Rates
Treasury yields fell across the yield curve, except for three-month, six-month, and one-year Treasury bills, after the Bank of Japan introduced a negative interest rate.
PulteGroup Saw an Increase in 4Q15 Gross Margins
PulteGroup’s (PHM) gross margins for 4Q15 came in at 23.5%, up 40 basis points on a year-over-year basis and down ten basis points from the third quarter.
US Dollar Index Got a Double Boost
The US Dollar Index measures the strength of the US dollar against the other major currencies. It saw a double uptick on January 29, 2016.
Properties for Sale: What Are They Like?
The National Association of Realtors’ data showed that, on average, properties stayed on the market for 58 days before they were sold to buyers.
D.R. Horton Updated Its Guidance for 2016
D.R. Horton (DHI) sounded relatively optimistic on its conference call. It was clearly happy with the most recent quarter despite the stock price reaction.
How Zoning Can Be a Hindrance to Housing Market Growth
Zoning restricts the freedom of property holders and REITs to use land however they want, given their specific development and investment interests.
How Zoning Regulations Benefit Communities
Zoning protects existing property values by preventing incompatible uses of a property. It also protects residential properties from commercial development.
How Zoning Regulations Impact City Development
Zoning is the way that governments supervise land development and the kinds of uses each individual property may be directed toward for the public interest.
What Are the Factors Driving Housing Affordability?
Housing affordability took a beating in July 2015 after reaching its high in January 2013. The higher ratio of the home affordability index signifies relatively higher home affordability to buyers.
Why Housing Affordability Is a Growing Concern in the US
With the rise in property prices, housing affordability has become a growing concern in many markets of the country. High housing prices force people to the suburbs and rural towns to find affordable housing.
The US Dollar Index Was Flat after a Mixed Data Release
The US dollar index was trading on a flattish note on January 20, with a slight rise of 0.10% for the day. In the end, the index closed the day at 99.09.
Home Prices are Rising, but Not Home Sales—Why?
A home is usually the most expensive asset that consumers can hold, and owning a home is among their lifetime goals. The question arises—why can’t more people own a house despite the availability of so many properties in the market?
What Investors Should Know about the Alternative Mutual Fund GABCX
GABCX is an alternative mutual fund that seeks to achieve total returns that are attractive to investors in various market conditions without excessive risk of capital loss.
Foreclosure Completions Fell in November: What Does It Mean?
Foreclosure completions fell by 4,000 units to 33,000 in November, according to CoreLogic. Completions fell 19% YoY (year-over-year).
Wages Dipped Slightly in December: Here’s Why
Average hourly earnings fell by 1 cent on a month-over-month basis in December 2015 and were up 2.5% year-over-year to $25.24. Average weekly hours were flat at 34.5.
Labor Market Ended 2015 with Strong Payroll Growth in December
In December 2015, non-farm payrolls increased by 292,000, easily topping Wall Street’s estimate of 200,000.
KB Home’s Earnings Miss Estimates
On an adjusted basis, KB Home’s net income came in at 43 cents per share, which missed the Wall Street estimate of 50 cents per share.
Treasury Yields Were Mixed amid Oil Price Volatility
Treasury yields rose across the yield curve—except for one-month T-bills, three-month T-bills, and three-year T-notes—in the week ending December 31.
Why Construction Spending Is So Important to the Economy
In the quarter ending September 30, construction spending as a percentage of GDP rose to 6.1%. This was a big rise from a year ago when it stood at 5.4%.
Housing Stocks Rallied Then Came to a Halt in December
Housing has been a bright spot in the US economy. But over the past month, housing stocks haven’t been performing well. ITB, a housing-focused fund, has fallen 4.7%.
Builder Confidence Slipped in December 2015
The NAHB Wells Fargo Housing Market Index measures builder confidence, gauging how builders view current and future sales of single-family residences. It asks builders to characterize sales as good, fair, or poor.
US Dollar Index Fell, GDP Revised Down
The US Dollar Index measures the strength of the US dollar against the other major currencies. It fell by 0.13% on December 22, 2015.
How Does Lennar Compare to Its Peers?
Lennar showed mixed results compared to its peers based on the PE and PBV ratios. The ETFs outperformed Lennar based on the PE and PBV ratios.
Treasury Yield Curve Flattened after US Interest Rate Hike
The US Treasury yield curve was flat for the week ended December 18, 2015, as short-term yields fell. Medium- to long-term yields rose after US interest rates rose by 25 basis points.
Analyzing Lennar’s EPS and Balance Sheet
Lennar (LEN) reported net earnings of $281.6 million, or $1.21 per share—compared to its net income of $245.3 million, or $1.07 per share, a year ago.
December’s Housing Market Saw a Drop in Buyer Traffic
According to the National Association of Home Builders (or NAHB), the housing market index fell by a single point to reach a level of 61.0 in December.
Toll Brothers’ Gross Margins Fall on a Year-over-Year Basis
In the fourth quarter of 2015, Toll Brothers’ (TOL) gross margins, excluding interest and write-downs, fell to 22.3% compared to 26.8% a year ago.
US Dollar Index Is Holding Steady
The US Dollar index was trading in a narrow range on November 18, 2015. The slight movements down were mainly due to housing data coming out on a mixed note and the FOMC minutes.
D.R. Horton Maintained Its Gross Margins
D.R. Horton’s gross margins held steady at 19.9% in the fourth quarter of 2015. However, they fell on a YoY (year-over-year) basis from 20.5% in the fourth quarter of 2014.
Wage Growth Could Be Picking Up
Average hourly earnings rose by 9 cents on a month-over-month basis in October and were up 2.4% YoY (year-over-year) to $25.20. However, wage growth is still barely outpacing inflation.
October Non-Farm Payrolls Came in Strong and Bonds Sold Off
In October, non-farm payrolls increased by 271,000, easily topping the Wall Street estimate of 185,000.
October Saw Generous Inflows for High-Yield Bond Funds
According to Lipper, net inflows for high-yield bond funds totaled $7.6 billion through October 28, compared to outflows totaling $1.9 billion in September.
Why High-Yield Bond Issuance Fell in October
High volatility in financial markets ensured low activity in the primary market of high-yield bonds in October. Dollar-denominated high-yield debt amounting to $9.4 billion was issued in October 2015.
First Data Issued the Most Junk Bonds in the Week to October 30
First Data (FDC) issued junk bonds worth $3.4 billion last week. The senior notes were rated Caa1/B and carried a coupon of 7.0%.
Stocks Fall with Release of Dallas Fed and New Home Sales Reports
October 26 saw the release of two important economic indicators, namely, the results of the Dallas Fed manufacturing survey and the new home sales report.
PulteGroup’s Valuation Is Not Expected to Improve Dramatically
PulteGroup’s valuation is not expected to improve dramatically from here unless the company shows some improvement in its finances.