Mad Money with Jim Cramer - MAD CAP RECAP - The Official Mad Money Blog
RSS FEED
RECENT POSTS
- Don’t Trust Buybacks
- Buying the Right Sell-Off Stocks
- Buy Broken Stocks, Not Broken Companies
- The Biggest Market Myth There Is?
- The Key to a Successful Turnaround
- Lightning Round: Corning, Visa, NYSE Euronext and More
- Cramer’s 3 Stocks to Avoid
- Cramer: Play Defense with B&G Foods
- Cramer: Chico’s Proves Ailing Retailers Can Make a Comeback
- Cramer's Advice for the SEC
MAD MONEY FEATURES
PODCASTSWatch the Lightning Round whenever and wherever you want.
OFFICIAL MAD MONEY WIDGETGrab this all-in-one application and get recaps of the show sent right to your desktop or blog.
CRAMERS SOUNDBOARDAdmit it: You've always wanted to hit the "They
know nothing!" button. Here’s your chance.
CHECK OUT OUR PHOTOSCheck out Cramer on set, back to school, behind the scenes and more.
SHOP FOR MAD MERCHANDISEBuy Cramer books, bobbleheads and other Mad Money merchandise.
RING TONESPick up the phone! It's Cramer! New Mad Money sounds for your cell phone.
TEXT MESSAGE ALERTMad Money's mobile. Get show highlights sent to your phone.
How to Play California’s Housing Rebound
Text Size 
Web Editor, Mad Money
California, one of the worst-hit parts of the US during the downturn, is coming back to life, Cramer said Tuesday. The state’s population is growing again, its major ports are getting busier, and, yes, home prices in the Golden State are rising. He’s so excited about California’s prospects that he’s offering up a different way to play them all week.
Monday was retail, where he recommended Costco [COST
Loading...
()
], but today’s show focused on housing. In addition to that home-price stabilization, Cramer noticed another major change: homebuilders are building again.
According to a research note from J.P. Morgan, March inventories were up 8%. These companies wouldn’t build new properties unless they could sell them, Cramer said. And with inventory levels in the state still way below their peaks, there’s plenty of room to expand and sell some more.
So how do you play housing in California? Much the same way Cramer approached retail there: look for companies with at least 25% exposure to the state. That qualifies KB Home [KBH
Loading...
()
], with 38% of its end-of-2009 backlog in California, Lennar [LEN
Loading...
()
] with 25% and Standard Pacific [SPF
Loading...
()
] with 56%.
Standard Pacific may be the most speculative – it trades under $5 and is up 373% over the last 12 months – but it’s Cramer’s favorite of the group. The company fell as low as it did because it operates in the ground-zero states of the real estate collapse: California, Arizona and Florida. Things got so bad for SPF that it was forced to take some huge impairments on 59% of its assets and needed an equity infusion from private-equity firm Maitlin Patterson to stay afloat.
But things have changed for Standard Pacific, Cramer said. Its gross margins are back up to 20%, compared with 13% in 2008. The prices of its homes have increased an average of 5% in California. January sales were up 10% year-over-year. And the company is now expanding beyond its core areas, buying up huge tracts of land on the cheap.
Despite all this, analysts remain bearish, with two of the seven covering SPF rating it a “buy,” compared to three “holds” and two “sells.” But that just means the stock can shoot higher, Cramer said, as these bears convert to bulls. He recommended getting in ahead of that.
“The rebound in this state is for real,” Cramer said of California, “and I think you should play it with a turnaround homebuilder like Standard Pacific.”
Cramer's charitable trust owns Costco.
Call Cramer: 1-800-743-CNBC
Questions for Cramer?
Questions, comments, suggestions for the Mad Money website?
Data is a real-time snapshot *Data is delayed at least 15 minutes
