BMHC ==> The Auggie Doggie Winner!

[New-born baby]

He's short

I don't know if any of you know who this guy is...He and have very different investing philosphies...But he is one of the sharpest Investors I know of:


http://stockcharts.com/def/servlet/F...42420&cmd=show

WOW, IIC. He's rich. He shorted the most of the homebuilders, and they all fell down together. This man knows what he's doing.

On the contrary, we bought into the short. HaHaHa . . . it ain't funny.

[mimo_100]

WOW, IIC. He's rich. He shorted the most of the homebuilders, and they all fell down together. This man knows what he's doing.

On the contrary, we bought into the short. HaHaHa . . . it ain't funny.

He draws a vertical line and labels it “technical note.” I assume this means that he

issued some kind of warning about the issue. Then, he points out a price and labels it “short” with a Beta value.



Beta A measure of a security's systematic or market risk. While most stocks move in in the same direction as the stock market, the level of the beta indicates the degree of correlation between a security and the market. The market is the benchmark and has a beta of 1.



Is he saying that when the Beta exceeds a certain value that it is time to short?

[[email protected]]

to MM R HOmebuilders bust?

I am a bit hesitant here for HB's ..Every dam analyst and report now is sayin ghousing is slowing and rates are flying up....Are they just mad at the HB's...They appear to be money making machines with a lot of inventory and potential for solid growth.....Again I reflect back to AZ....The place is going crazy.....What is your take Mr. Market on the current vibe of the HB's and construction? ALso VLO has been doing well...Like that CO. also...


Thanks bud,


CH

[New-born baby]

No

He draws a vertical line and labels it “technical note.” I assume this means that he

issued some kind of warning about the issue. Then, he points out a price and labels it “short” with a Beta value.



Beta A measure of a security's systematic or market risk. While most stocks move in in the same direction as the stock market, the level of the beta indicates the degree of correlation between a security and the market. The market is the benchmark and has a beta of 1.



Is he saying that when the Beta exceeds a certain value that it is time to short?

No. What he is saying is that he knew that an interest hike was coming via Green-Eugenespan. That always knocks home builders down. So he saw the spike, knew of the monthly FOMC meeting, and just shorted all the builders with the highest beta. That means for every $1 the Dow loses, you can expect KBH to lose $1.68 (1.68 beta). He's now rich.

[lemonjello]

Options stuff -try it at your own risk!

Glad you liked it.

Other plays? I used a plain vanilla call on TOL. Sometimes for high priced stocks over $100 I create a synthetic stock position by selling a put and buying a call which can get me into a stock w/o much cash out of pocket.

I used a spread for BMHC instead of just a call because it lowers the overall cost of the trade and still limits your downside like a single call. If you're mostly shooting for 15% on every trade then you can set up a spread to catch most or all of the 15% depending on which calls you pick. While selling a 'naked' call is normally extremely risky, in this case it is hedged by the purchased call so for every $1 the short call is in the money is hedged by the same movement in the long call.

Of course, you have to select the options you use carefully and watch all option positions very closely since they may not behave exactly like the stock.

The CBOE has a website for learning more about options if anyone is interested.

http://www.cboe.com/LearnCenter/default.aspx

Good luck to everyone.

Ya know, that really is clever of you lemonjello! And for anyone not willing to sell calls, what kind of play would you recommend as far as buying puts and calls together?

And I guess it should be noted that if one does play an each way option play for these picks, one must realize that should the stock stay stagnant you will lose premium as time progresses. The way to make the money is if the stock moves.

The more I read about options the more my head spins and I realize there really are some very clever options specialists out there. There really is a lot to it.

[New-born baby]

Experiment

LEMONJELLO:

Would you care to set up for us a real trade on this forum, so we could watch it in real time? I would appreciate it.

[mimo_100]

LEMONJELLO:

Would you care to set up for us a real trade on this forum, so we could watch it in real time? I would appreciate it.

Strategy – Equity Collar



Below is a link to a pretty basic options strategy pdf document at the CBOE



http://www.cboe.com/Strategies/pdf/EquityCollarStrategy.pdf

[mrmarket]

I am a bit hesitant here for HB's ..Every dam analyst and report now is sayin ghousing is slowing and rates are flying up....Are they just mad at the HB's...They appear to be money making machines with a lot of inventory and potential for solid growth.....Again I reflect back to AZ....The place is going crazy.....What is your take Mr. Market on the current vibe of the HB's and construction? ALso VLO has been doing well...Like that CO. also...


Thanks bud,


CH

What drives a stock price, at the end of the day, is earnings earnings earnings. Let the people speculate all they want. Until homebuilders stop making oodles of money, I will continue to like their stocks. Does that answer your question?

[lemonjello]

I'll try to remember. The last pick, Banco, didn't have options.

You just have to remember options have unique risk characteristics so they might not be for everyone.

Good luck. It's looks like the homebuilders are starting to turn a bit.

LEMONJELLO:

Would you care to set up for us a real trade on this forum, so we could watch it in real time? I would appreciate it.

[spikefader]

What drives a stock price, at the end of the day, is earnings earnings earnings. Let the people speculate all they want. Until homebuilders stop making oodles of money, I will continue to like their stocks. Does that answer your question?

I'm no fundy expert, and agree broadly with what MM is saying....but one could argue that earnings merely starts the engine and helps to motivate. What actually drives price can be anything from a million terrified Joe-six-packs selling through support, in a panic from bad news, to an aggressive bullish mutal fund that 'wants in' and prepared to support prices at key levels, and push price through resistance.

Other motivating factors come in to play beyond how much money a company makes and whether the Street perceives a stock is undervalued relative to those earnings.

[New-born baby]

Not last year's report, either

I'm no fundy expert, and agree broadly with what MM is saying....but one could argue that earnings merely starts the engine and helps to motivate. What actually drives price can be anything from a million terrified Joe-six-packs selling through support, in a panic from bad news, to an aggressive bullish mutal fund that 'wants in' and prepared to support prices at key levels, and push price through resistance.

Other motivating factors come in to play beyond how much money a company makes and whether the Street perceives a stock is undervalued relative to those earnings.

And here's my two-cents worth:
Wall Street is interested in the prospect of earnings, earnings, earnings for NEXT year. Doesn't matter what it reports this quarter. Wall Street looks ahead six, nine, twelve months. And that is our problem with TOL, KBH, BMHC, etc. Wall Street can't see past Alan Greenspan's nose.

[mrmarket]

And here's my two-cents worth:
Wall Street is interested in the prospect of earnings, earnings, earnings for NEXT year. Doesn't matter what it reports this quarter. Wall Street looks ahead six, nine, twelve months. And that is our problem with TOL, KBH, BMHC, etc. Wall Street can't see past Alan Greenspan's nose.

NBB,

Where Wall Street is wrong is that rising interest rates won't put a stop to homebuilding purchases. Rising rates are a function of a stronger economy, which means more wealth for homebuyers.

If earnings keep going up, and the stock price doesn't go up with it, then you're back to my "trying to hold an empty keg of beer underwater" analogy. You just can't do it very long.

Now then, if earnings of these companies DO erode. It's a whole different ballgame. But this isn't happening AND these stocks are STILL cheap on a valuation basis.

[IIC]

He draws a vertical line and labels it “technical note.” I assume this means that he

issued some kind of warning about the issue. Then, he points out a price and labels it “short” with a Beta value.



Beta A measure of a security's systematic or market risk. While most stocks move in in the same direction as the stock market, the level of the beta indicates the degree of correlation between a security and the market. The market is the benchmark and has a beta of 1.



Is he saying that when the Beta exceeds a certain value that it is time to short?

I don't really know...However, I do happen to know he is very sharp...Knows Canslim inside out although I believe he uses a modified approach...He has a paid website too...I don't want to speak for him...But you can email him...Doug(IIC)

[IIC]

All I can say is that yesterday's earnings are history...Tomorrow's earnings are what counts....Unfortunately we depend on lame brain analyst projections...But Publics are getting smarter...they are taming down what they say...The reason???...So they smash estimates...The market is one big game...The little guy's ( Like me and most... if not all of us) are charged with trying to read between the BS...Doug(IIC)

[New-born baby]

12 August 2005: PLEASE MR CUSTER

CAUTION LONGS! Set tight stops or jump overboard on BMHC today!
[Do I sound like Spike? ].

Really, BMHC looks like a dead man to me this morning. Look at these two charts.

Chart One: a screaming bear flag begging chartists to short BMHC at the open today. Target $58 or lower.


Chart Two:
Double trouble! If BMHC drops below the neckline ($69.50), the chart screams that $58 is the first target, or even $54 minus as the second. "Pick your support."


"Please Mr. Custer! I don't want to die!"