Only in America...
Whoever came up with the idea of celebrity-designed mass-market goods is an astounding genius. Why collect $10 for a simple grill, if you can collect $19.99 for a George Foreman-designed one. Remember Salton (ticker: SFP), anyone? And that toaster you've always wanted to have, wouldn't you be 10x happier if it was designed by some "well-known" (no-name to most of us) fashion designer. I'd be curious to see the stock performances of all companies which stoop so low as to hire a celebrity to promote their mass market products. If SFP's performance is any guide, the trend doesn't look too good. The stock traded as high as $60 in 2000, it's stuck around $2.50 these days. Not bad, eh?
So what was KB Homes (KBH) thinking when it teamed up with Martha Stewart (MSO) to sell Martha-Stewart-(convicted felon)-designed homes? MSO's stock price performance follows the ups and downs of its short interest. And if only people woke up and took a look at what the company actually does and what their financial metrics are, perhaps the price wouldn't be $20, or even $34 (where it was a few weeks back), but more like, oh, say $7, once the shares discovered the physical nature of the force of gravity. It seems Martha's new shoddy TV show isn't quite enough to propel her stock into the stratosphere, so she needs KBH (which, incidentally, has a reputation for building shoddy houses) to prop up her image. I don't know, who is the greater fool here?
A lot of the homebuilder sector performance over the last 6-7 weeks reminds me of the CSCO days in 2000 -- greatest ever earnings and euphoria and then down, DOWN, D O W N. When expectations are fully priced in and funds such as Lone Pine and Citadel have already loaded up and gorged themselves on the sector, how much more upside could there be, given the macro environment? KBH, TOL, DHI, PHM -- they are down tremendously in the last two months, and I can't help but think that we'll be seeing a lot more downside to these names in the coming quarters as well. I expect some of these funds to start puking the above names (if those stock don't perk up sooner rather than later), even if their cost basis may be a lot lower. Add the homebuilders to my list of private secular bear market sectors such as retail, consumer discretionary and gaming.
If it wasn't for the oil&gas (including refineries & oilfield exploration) sector, the SPX would be down 15% YTD by now. What happens if the energy outperformers stagnate as well?
So what was KB Homes (KBH) thinking when it teamed up with Martha Stewart (MSO) to sell Martha-Stewart-(convicted felon)-designed homes? MSO's stock price performance follows the ups and downs of its short interest. And if only people woke up and took a look at what the company actually does and what their financial metrics are, perhaps the price wouldn't be $20, or even $34 (where it was a few weeks back), but more like, oh, say $7, once the shares discovered the physical nature of the force of gravity. It seems Martha's new shoddy TV show isn't quite enough to propel her stock into the stratosphere, so she needs KBH (which, incidentally, has a reputation for building shoddy houses) to prop up her image. I don't know, who is the greater fool here?
A lot of the homebuilder sector performance over the last 6-7 weeks reminds me of the CSCO days in 2000 -- greatest ever earnings and euphoria and then down, DOWN, D O W N. When expectations are fully priced in and funds such as Lone Pine and Citadel have already loaded up and gorged themselves on the sector, how much more upside could there be, given the macro environment? KBH, TOL, DHI, PHM -- they are down tremendously in the last two months, and I can't help but think that we'll be seeing a lot more downside to these names in the coming quarters as well. I expect some of these funds to start puking the above names (if those stock don't perk up sooner rather than later), even if their cost basis may be a lot lower. Add the homebuilders to my list of private secular bear market sectors such as retail, consumer discretionary and gaming.
If it wasn't for the oil&gas (including refineries & oilfield exploration) sector, the SPX would be down 15% YTD by now. What happens if the energy outperformers stagnate as well?
posted by Ivan at 10/18/2005 11:00:00 AM
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