What do you really say about a homebuilder like Lennar (NYSE:LEN) right now? On the one hand, we've got continued sugar-coated projections coming out of the National Association of Realtors, and on the other, we've got competitors like Hovnanian (NYSE:HOV) painting a pretty bleak picture of the market. In the long term, homebuilding as an industry is going to stick with us, but the question is: Just how soon will we see it start to turn around?
After the earnings are released, we'll have plenty of data to dig into. But before that happens, let's step back and take a look at what investors think about Lennar as a long-term investment. To gain this insight, I've tapped into Motley Fool CAPS, where more than 30,900 investors have joined together to offer their thoughts on more than 4,600 companies, Lennar among them. Here's what Fools have to say about the company.
Up or down?
From the 271 investors who have weighed in on Lennar, the prognosis is not exactly rosy.
Out of a possible five stars, Lennar has managed to grab just a single one. Fewer than 50% of all players who have weighed in on the company have been bullish on it. When it comes to the CAPS All-Stars -- those investors in the top 20% of all CAPS players -- it's even worse, with less than a third of that group approving of the stock.
Among comparable stocks, Lennar finds itself in similarly disliked company.
|
Stock |
CAPS Rating |
|---|---|
|
Centex (NYSE:CTX) |
* |
|
DR Horton (NYSE:DHI) |
* |
|
Hovnanian |
* |
|
KB Home (NYSE:KBH) |
* |
|
Lennar |
* |
|
Pulte Homes (NYSE:PHM) |
* |
|
Toll Brothers (NYSE:TOL) |
* |
Wall Street vs. Main Street
Wall Street analysts are all over the place on this one. Six of the 12 analysts following the stock have stuck right in the middle and said to just hold. Meanwhile, the other six have split 50/50 between saying investors should be buying the stock and saying they should be selling it. Some help that is!
The stock itself has trailed the S&P 500 by more than 30% over the past year. The underperformance is even worse when we look out a little further -- between the summer of 2005 and last summer, the stock plummeted from the upper $60s to $40.
Bull pitch
One of the brave bulls for Lennar is CAPS' top player, TMFEldrehad, who shares his reasoning for the outperform call he's kept alive since last summer:
I'm taking this opportunity to snatch up a few homebuilders because I think they, as a group, are oversold. Yes, with interest rate fears and many Americans mortgaged to the gills, there may well be more pain ahead for this group -- but that's a risk I'm willing to take and a pain I'm willing to endure. I'm convinced that when the housing market turns around, and it inevitably will, the better companies in this group will reward the patient, short-term risk-tolerant bargain hunters with outsized returns.
Bear pitch
On the bear side, another top player in CAPS, WBuffettJr, countered around the same time with:
As with all home builders, you need to come to terms with whether you think they have dropped too far or we are just getting started. If you believe we still have room to fall, Lennar is a weak position. It has operations in the worst bubble areas, including ... Arizona, California, Colorado, Florida, Maryland, Nevada, New York, and Virginia.
... I believe builders will continue to decline to book value, and some will fall well below book. On top of that, builders operating in bubble states may likely see their book values decline. At the very least, I expect this one to be outpaced by the S&P 500.
Who said that?
To read more from the wise Fools who penned these words, and explore the wealth of additional financial data we've put together on the company, just click here.
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool's disclosure policy had a page on MySpace, but became way too popular and ended up spending all of its time updating its photos.
