Wednesday, April 8, 2009

Pulte Homes buys Centex

More encouraging signs that CEO and BODs think the market has reached a bottom. Mergers are starting to fly in from even the beaten down sectors like homebuilding. FundMyMutualFund highlights the details of this merger so I won't go into the details. We sold the Centex (CTX) in the Growth fund on the 20% bump. Over the last year it's been costly to hold onto shares of buyout targets

The American Homebuilding sector hasn't been a favorite sector of ours though we've had a few shares of CTX and Toll Brothers (TOL). This sector is likely to have a slow few years due to high inventories and the negativity on the housing bubble. The more promising sector is international were demographics is much more pormising. The better plays today were Gafisa (GFA - Brazil) and Homex (HMX - Mexico). Both shot up on the news with GFA being up nearly 10% which I don't really understand. Guess they are somewhat related being in the same sector, but the markets in the US and Brazil are dramatically different. Brazil faces a housing shortage of nearly 1M units while the US basically builds new houses because people want a new place or a different location. It's hardly lack of supply or economics driven for the most part. For now, GFA has been the play in the Growth fund.

Also, Morgan Stanley (MS) would be a good play on the unfreezing of the capital markets. If homebuilders can merge, then that market is beginning to unthaw and MS along with Goldman Sachs (GS) are two of the few large players left. Blackstone (BX) is also another favorite from the unthawing of the markets. Shares were purchased in them for the Growth fund today.

In general, still stay away from the domestic homebuilders. They are still nothing more then short term trades.

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