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Two Ways To Play: Will Homebuilders Collapse?


Strengthen your portfolio in good times and bad.

Merrill Lynch strategist Brian Belski says US homebuilding stocks have yet to bottom because housing gauges are still slumping. This according to Bloomberg.

In a report published today, Belski said falling home prices, declines in building permits and higher mortgage rates relative to Treasuries "remain extremely negative" for the industry. In his view, share prices of homebuilding stocks haven't fallen enough to account for the possibility that spreads may widen if home prices and permits fall farther.

Homebuilding stocks have been some of the S&P 500's best performers in recent weeks. The Homebuilding Index jumped 23% - about 4 times as much as the S&P 500.

See Professor Bennet Sedacca's related article, In Credit Unwind, Earnings Estimates Are Shots in the Dark.

From the Bull Pen: Bulls can look elsewhere. Are commodity-related stocks finally ready for a bounce? Consider oil and gas driller Rowan (RDC). A sell stop can be placed below $19.

From the Bear Cave: Consider Home Depot (HD) for a downside play. A buy stop in the near term can be set above $21.50.
No positions in stocks mentioned.

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