Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm CNBC:
LEN reported strong earnings this morning and is having a nice up move along with the entire housing sector. The stock had been in a strong uptrend since the Oct 3rd, 2011 lows for the broader market, but that was broken in mid-May, and today’s recovery looks like a retest of those previous highs rather than the start of a new trend:
The stock has really just followed the broader housing index higher, essentially tracking the other housing stocks higher as the housing data has improved:
Meanwhile, the credit markets are showing more signs of concern than the stock market, as LEN 5 year CDS is actually a good bit higher than it was the last time LEN was at $29 in mid-May. The CDS market does not feel as good about LEN’s prospects as it did 2 months ago, despite the recent strong data. I’ve circled the previous low CDS levels when stock was around here in green:
I think the market has effectively priced in the recent strong housing data, but looking forward 6-9 months, the market is less enthusiastic with what it sees, and that’s been the main reason why the stocks have been unable to make new highs. Unless the U.S. housing market somehow decouples from the global economy, I wouldn’t touch the U.S. housing stocks on the long side.