Based on the theory that the housing market is in an unsustainable bubble, many hedge funds have shorted homebuilding stocks. Many of the homebuilder stocks have become somewhat crowded shorts, leading to high volatility. For instance, LEN has a short ratio (shares short/avg daily volume) of 3.6 with 6% of the float (shares actually traded on the open market) short. TOL has a short ratio of 3 with 14% of the float short. KBH has a short ratio of 2 with 6.5% of the float short
If you are looking to short homebuilding stocks, perhaps you should instead look at some of the smaller building materials companies. From the building materials group, I have chosen companies that have a relatively high valuation, high levels of debt, and low free cash flow. While the volume in these stocks is much lower than the traditional homebuilders, so is the percent of the float that has been shorted.
Unless otherwise noted, the data is courtesy Yahoo Financials, valuation charts are courtesy Baseline and stock charts are courtesy Stockcharts.com.
Disclaimer: I do not have a position in any of the stocks.
SSD – Simpson Manufacturing Co Inc
Market Cap: 1.48B
Enterprise Value: 1.44B
Trailing P/E (ttm): 18.51
Price/Sales (ttm): 2.13
Price/Book (mrq): 3.21
Enterprise Value/EBITDA (ttm): 9.61
Total Debt/Equity (mrq): 0.00
Cash From Operations (ttm): 22.82M
Free Cashflow (ttm): -23.15M
Short Ratio (as of 8-Mar-05): 7.32
Short % of Float (as of 8-Mar-05): 2.93%
Simpson Manufacturing Co., Inc., operates through its subsidiaries, Simpson Strong-Tie Company Inc. (Simpson Strong-Tie or SST) and Simpson Dura-Vent Company, Inc. (Simpson Dura-Vent or SDV). Simpson Strong-Tie designs, engineers and manufactures wood-to-wood, wood-to-concrete, wood-to-masonry connectors, screw fastening systems and collated screws, and pre-fabricated shearwalls. SST also offers adhesives, mechanical anchors and powder actuated tools for concrete, masonry and steel. Simpson Dura-Vent designs, on the other hand, engineers and manufactures venting systems for gas, wood, oil and pellet burning appliances.
UFPI – Universal Forest Products, Inc
Market Cap: 703.22M
Enterprise Value: 885.09M
Trailing P/E (ttm): 14.99
Price/Sales (ttm): 0.29
Price/Book (mrq): 1.98
Enterprise Value/EBITDA (ttm): 6.96
Total Debt/Equity (mrq): 0.581
Cash From Operations (ttm): 50.23M
Free Cashflow (ttm): 9.51M
Short Ratio (as of 8-Mar-05): 10.696
Short % of Float (as of 8-Mar-05): 3.79%
Universal Forest Products, Inc. engineers, manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products to the do-it-yourself/retail (DIY/retail) market, and site-built construction, manufactured housing and industrial markets. The DIY/retail market includes home center retailers, retail-oriented regional lumberyards and contractor-oriented lumberyards. Customers in the site-built construction market are large-volume, multi-tract builders and smaller volume custom builders, as well as builders engaged in multi-family construction and commercial construction. The manufactured housing market consists of producers of mobile, modular and prefabricated homes, and recreational vehicles. The industrial market customers include industrial manufacturers and agricultural customers who use pallets, specialty crates and wooden boxes for packaging, shipping and material-handling purposes. The Company operates in the United States, Canada and Mexico.
BMHC – Building Materials Holding Corp
Market Cap: 613.83M
Enterprise Value: 801.94M
Trailing P/E (ttm): 11.49
Price/Sales (ttm): 0.29
Price/Book (mrq): 1.87
Enterprise Value/EBITDA (ttm): 7.42
Total Debt/Equity (mrq): 0.64
Cash From Operations (ttm): 11.04M
Free Cashflow (ttm): -16.79M
Short Ratio (as of 8-Mar-05): 1.938
Short % of Float (as of 8-Mar-05): 3.19%
Building Materials Holding Corporation (BMHC) specializes in providing construction services, including structural framing and shell construction, manufacturing building components and installation, value engineering, and lumber and high-quality building materials to residential builders across the United States. The Company’s principal operating subsidiaries include BMC Construction, Inc., which provides construction services, and BMC West Corporation, which is primarily engaged in lumber and building materials distribution, truss manufacturing and millwork operations as well as installation and framing services in selected markets. BMHC’s business focuses on two customer categories in the new residential construction market: large, high-volume production homebuilders with national or multiple-market operations; and local custom, low-volume production homebuilders and new-home contractors.
Elk – Elcor Corp
Market Cap: 741.95M
Enterprise Value (31-Mar-05): 900.71M
Trailing P/E (ttm): 20.55
Price/Sales (ttm): 1.11
Price/Book (mrq): 3.05
Enterprise Value/EBITDA (ttm): 10.5
Total Debt/Equity (mrq): 0.843
Cash From Operations (ttm): 13.57M
Free Cashflow (ttm): -37.20M
Short Ratio (as of 8-Mar-05): 2.865
Short % of Float (as of 8-Mar-05): 2.62%
ElkCorp is primarily engaged in the building materials industry. The Company, through Elk Premium Building Products, Inc. and its subsidiaries (collectively, Elk), is engaged in the manufacturing of premium roofing products, performance nonwoven fabrics and composite building products. The building products segment is Elk’s primary business, accounting for 97% of consolidated sales in the fiscal year ended June 30, 2004. The Company’s roofing products are premium laminated, fiberglass asphalt shingles and accessory roofing products for steep slope applications. Elk’s performance nonwoven fabrics subsidiary is a manufacturer of nonwoven fiberglass shingle substrates and other products. The Company’s composite building products is a platform designed for advanced composite technology, as well as the development of high-end, non-asphaltic roofing products. Elk’s Other, Technologies segment consists of Ortloff Engineers, LTD, Chromium Corporation and Elk Technologies, Inc.
ASD – American Standard Companies Inc
Market Cap: 9.97B
Enterprise Value (1-Apr-05): 11.40B
Trailing P/E (ttm): 32.64
Price/Sales (ttm): 1.04
Price/Book (mrq): 10.60
Enterprise Value/EBITDA (ttm): 15.39
Total Debt/Equity (mrq): 1.786
Cash From Operations (ttm): 764.70M
Free Cashflow (ttm): 548.80M
Short Ratio (as of 8-Mar-05): 3.331
Short % of Float (as of 8-Mar-05): 2.20%
American Standard Companies Inc. (American Standard) is a global, diversified manufacturer of high-quality, brand name products in three major business segments: air conditioning systems and services (Air Conditioning); bath and kitchen fixtures and fittings, and vehicle control systems. Air Conditioning is a global manufacturer of commercial and residential heating, ventilation and air conditioning (HVAC) equipment, systems and controls. Bath and Kitchen is a producer of bathroom and kitchen fixtures and fittings in Europe, the United States, Central America and Asia. Vehicle Control Systems, operating under the WABCO name (WABCO) designs, manufactures and sells braking and control systems, primarily for the worldwide commercial vehicle industry.
