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Two Ways: The Death of the McMansion?


Strengthen your portfolio in good times and bad.


KB Home (KBH), the fifth-largest US homebuilder, reported better-than-expected earnings after the company switched to a new line of smaller, cheaper units that give customers plenty of options in customization.

The company said its first-quarter loss was just $0.75 a share, $0.06 better than Thomson First Call estimates. Revenues fell over 60% year-over-year to $307.4 million, which was below expectations of $347.5 million. But, according to the Wall Street Journal, KB also had fewer writedowns, a reduction in cancellations and 26% spike in net orders.

In a conference call, President and Chief Executive Jeffrey Mezger said "homes must change with the times." He expects these new models to account for about 50% of deliveries by the end of 2009.

Shares of KB Home led the sector, gaining 6.29% to $15.05 in today's trading, while the broader Homebuilders ETF (XHB) fell 2.05% to $11.47.

See Professor John Mauldin's Buy a Home, Get a Green Card.

From the Bull Pen: The current rally still must be respected. Bulls can continue to use the S&P 500 Depository receipts (SPY) eyeing support near $79.

From the Bear Cave
: Bears can look to Simon Property Group (SPG). We know of the bleak housing picture, but technically this stock is very weak as well. Breaking below $32, it could see new lows in a short amount of time.

The feast continues on Fat Friday. Be safe and have a great weekend!

In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positve change in the lives of children.

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No positions in stocks mentioned.

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