August 26, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of homebuilders -- and PulteGroup (NYSE: PHM ) in particular -- surged higher in trading today on hopes that homebuilders have hit bottom. At the peak, PulteGroup's shares were up nearly 12% from yesterday's close.
So what: After Toll Brothers (NYSE: TOL ) reported earnings on Wednesday, homebuilders have started to move higher the past few days. Today, after trading lower to start the day, buyers came in and bought Toll, PulteGroup, and KB Home (NYSE: KBH ) on hopes that they've bottomed out. All three of the stocks moved in lockstep with each other, so this is just a broad move for the sector as a whole.
Now what: Housing has to bottom out sometime, right? Today, TheStreet.com made the argument that a contrarian approach is the way to go, and that homebuilders are a great buy. But fellow Fool Rick Munarriz thinks caution is still in order. Only time will tell who is right, but I would tread cautiously today. Toll Brothers reported a profit this week, but it wasn't terribly impressive. This bounce by PulteGroup and others could be more of a dead-cat bounce. Buyer beware!
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