Wednesday, April 4, 2007

Catching Up - New Century Bankruptcy, Gina on American Idol, and Homebuilder Stock Values?

I finally got some breathing room at work.

In non-finance news, I can't believe Gina got voted off American Idol! What a crock. I considered her one of my top 3.

Not the biggest shocker in the world here, but New Century filed for bankruptcy. I kind of had a feeling they would about a month ago. Hope you found that liquidation analysis pretty interesting.

I've recently become pretty interested in homebuilding stocks. Take a look at a company like DR Horton Inc. (NYSE: DHI). Selling at book value, a trailing P/E of 6.61, and sporting a 10% ROA and 17% ROE. These stats are enough to make any value investor salivate. However, the prospects for the company and the industry as a whole are currently extremely uncertain. Are rising subprime mortgage defaults a short-term problem? Is housing in for a major correction?

Anyway, I think there is some value there, but I haven't taken a hard enough look at any of these companies yet. I have gotten some copies of their 10-Ks and plan on working my way through them. The big question in my mind is... are these companies going out of business? If so, then they aren't worth buying. If not, and you have a long term outlook, you could be looking at some great bargains. As Warren Buffett would have you do... be greedy when others are fearful (but be greedy in a sensible way).

Finally, Sanjaya, you don't deserve Gina's spot on the show.