Gafisa Shares Popped: What You Need to Know

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 South American homebuilder Gafisa (NYSE: GFA  ) climbed 11% today after economists cut their Brazilian 2012 inflation forecast for a fifth straight week.

So what: The forecast suggests that borrowing costs in the country will drop and, in turn, lure consumers into purchasing more new homes. Gafisa shares have been walloped over the past several months on a string of earnings misses, so it's no surprise that traders are rushing to get ahead of a possible 2012 turnaround.

Now what: Don't let today's rally keep you from looking into Gafisa. Even with the pop, Gafisa is still down an ugly 65% over the past year and continues to trade at a single-digit P/E. And with the Brazilian housing market expected to stay hot for at least another five years, the stock doesn't feel like a value trap, either.

Interested in more info on Gafisa? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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