So there’s a bit of a blurb in the Wall Street Journal today about billionaire hedge-fund manager Edward Lampertand his ESL Investments Inc. buying into a few home builders (Centex and KB Home ) as well as a few mortgage lenders (PHH and CIT ) and Home Depot just to boot.
He made these buys sometime in the first quarter of this year, so now everyone’s asking if his supposed bottom feeding was a tad premature.
The home builder stocks rallied briefly in the late winter/early spring, but now they’re down 15 percent in the last three months after already plummeting close to 60% in the last year. Most analysts I talk to are not recommending anyone get into the builders for a while, especially since home prices haven’t slowed their slide and aren’t expected to for some time.
The nature of the group is of course cyclical, and folks are always trying to anticipate the next move and try to be early since the market tends to be anticipatory. But did Lampert jump too soon? Even if the stocks are 9 months ahead of a recovery, which some say they are, I’m not sure all is going to be turning around in just nine months.
The home building stock sector relies heavily on the macro data, like new home sales and housing starts, and neither of those is in recovery yet. So why did Lampert make the move, given the fact that he’s already way down on his investment? Maybe he feels that the stocks are low enough now that the downside is more limited than the upside potential. Of course, he’s also got a lot of money to burn.