KB Home 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 homebuilder KB Home (NYSE: KBH  ) were surging today, gaining as much as 20% in intraday trading after competitor Lennar (NYSE: LEN  ) announced a positive earnings surprise.

So what: "Good news" and "homebuilders" are two things that don't seem to go together these days. But that's exactly why just a glimmer of good news from Lennar was able to send KB Home shares spiking. Though Lennar's profit fell nearly 6% for the fourth quarter, revenue rose 11% and the average sales price rose slightly.

Now what: Is this a good sign for the sector? Sure it is. But I'm not convinced that the reaction from KB's shares is warranted. The housing market still has a long road ahead before homebuilders are out of the woods, so I can't see myself rushing to buy after a single data point -- particularly when it's a data point that's not even from KB.

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Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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