FMHQ (Friday Morning Housing Quant)

Takeaway: The builders, under pressure for the last 3-4 weeks, are now roughly flat QTD, while the housing ETFs remain up 3-4% QTD.

Our FMHQ (Friday Morning Housing Quant) tables present the state of the publicly traded homebuilders in a visually-friendly, quantitative format that takes about 60 seconds to consume. 

 

Takeaways: 

  • Housing Macro | Rates:  Alongside the labor supply consternation coming out of 3Q builder earnings and some incremental softening in the demand data over the last month, the primary macro factor impacting the space has been the rise in rates.  Rates on the 10Y TSY are up +34bps over the last 20 trading days as the market priced in a rising probability of movement in the policy rate out of the Fed in December.  The shift in 30Y Mortgage Rates has been notably more muted, rising just +11bps over the same period.  Outside of (what have become) recurrent bouts of rate volatility, our late-cycle macro expectation on rates remains lower-for-longer – a view finding some further confirmation this morning with domestic retail sales disappointing and wholesale price inflation missing expectations and accelerating further into the negative at -1.6% YoY. 
  • Performance Roundup: It's safe to say that the housing stock complex has been weak of late. Interestingly, in spite of a spate of weak earnings prints and subdued outlooks, the average builder stock remains roughly flat QTD. QTD absolute returns for ITB and XHB stand at +3.9% and +3.1% vs the S&P 500 +6.6%. Meanwhile, the average builder from our tables below is -0.9% QTD. Our preferred four horsemen of 4Q among builders are NVR, LEN, BZH & KBH, which are +6.9%, +1.2%, +5.3%, -3.5% QTD. The three best performing builders thus far this quarter are NVR, DHI (+5.6%) and BZH. The three worst performing builders are TMHC (-13.6%), PHM (-5.0%) and MTH (-4.2%).

  • Insider Buying: A Director at Hovnanian (HOV) purchased 20k shares (~$45k) in late October. Outside of that, there's been no recent insider buying in the sector.
  • Beta: The highest beta names (1YR) remain HOV (1.51), KBH and BZH which are at 1.34 and 1.36, respectively. At the other end of the spectrum, the lowest beta plays are NVR (0.60), MDC (0.92) and TOL (0.99).
  • Short Interest: CAA, KBH and DHI have seen SI creep higher, rising as a % of SO by 5.0%, 4.2% and 1.5%, respectively in the latest month. TMHC, HOV & MTH have seen SI fall by 2.3%, 2.0% and 1.8%, respectively.
  • Sell Side Sentiment: MTH has seen the largest drop in sell side support (-10.1% 1M change), while BZH has seen the largest bump in support (+9.1% 1M change).
  • Valuation: The cheapest names in the group currently are BZH (7.4x), TPH (9.3x) and TMHC (8.7x), while the most expensive are NVR (15.0x), LEN (12.5x), and TOL (13.1x).

 

FMHQ (Friday Morning Housing Quant) - BQ 1

FMHQ (Friday Morning Housing Quant) - BQ 2

 

FMHQ (Friday Morning Housing Quant) - BQ 3

 

FMHQ (Friday Morning Housing Quant) - BQ 4

 

 

 

Joshua Steiner, CFA

 

Christian B. Drake


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more