Posted by RR on January 29, 2008 at 16:24:43:
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Builder Stocks?? - Posted by newbie
Posted by newbie on January 28, 2008 at 11:44:35:
Can somebody explain why the builers stocks are up 10-20% from the beginning of the year with all the negative news about housing and all? Are these the signs of bottoming out or long-term bargain hunting? Just curious…
Re: Builder Stocks?? - Posted by Rich-CA
Posted by Rich-CA on January 28, 2008 at 18:10:54:
Stocks have a funny way of being priced, part perception, part speculation and part fundamentals.
The fundamentals of a company are what it would be worth if sold on the open market. Some companies have factories and equipment that are worth more than all their outstanding stock, so if you buy there and they liquidate, you end up ahead. Stocks in that condition almost always go up unless the company is going out of business. if do not think that is the situation with builders.
Mergers and acquisitions. This is where I think the boost is coming from. Whenever a company is considered a candidate to be bought, the stock will tend to rise in anticipation of a buyout offer, which is almost always an above market offer. This happened to a number of smaller banks around here (No Cal) around 1999 when banks who did not update their systems for Y2K opted to be purchased by a company that had done the work rather than pay for it themselves. made some cash on the up tick in prices just before the offer was made. I have also made money on some tech companies when they were purchased by other tech companies.
Newbie you’re not alone,I am baffled - Posted by RR
Posted by RR on January 28, 2008 at 14:59:28:
Where did you see these numbers?
We need an explanation from an economist,I wonder if the current market killed all the competition and those who were able to survive have better chances.
Re: Builder Stocks?? - Posted by Gene
Posted by Gene on January 28, 2008 at 14:23:52:
Look at them yoy instead of ytd and they paint a different picture.
Some will make it and are probably a good deal right now for a long term hold. Some are on their way to zero.
Risky to call…kind of like all speculating.
How often this happens? - Posted by RR
Posted by RR on January 28, 2008 at 19:14:49:
How often a stock of a company goes up after gets purchased by other companies?
It would be fair to say 7 out of 10 times(purchases)?
For every a hundred companies that were purchased by other companies what is the % that will go up?
Have you study the stats?
Just curious.
Re: Newbie you’re not alone,I am baffled - Posted by newbie
Posted by newbie on January 28, 2008 at 16:46:37:
I’ve been watching it for several weeks now. First time I noticed it when two weeks ago it was announced that the construction starts hit 27 year low, the same day every single builder stock was up, but not a single financial channel mentioned this disparity. Last week, when the stock market pretty much crashed in free fall, on the final day when the Dow hit 11,800 again I noticed that the builder stocks were doing pretty well. This morning, one of the commentators on MSNBC mentioned that he was dazzled by the fact that from the beginning of the year builder stocks are up in double digits, but none of them had any explanation for that, they just said “very interesting” and that was the end of this “analysis”.
I personally believe that we are getting close to the bottom and this may be the sign of it. There is a lot of bad news floating out there, but a lot of this bad news is old news just being chewed on for a while, as a result we are dealing with the fact that for the next six months we’ll be analyzing and over-analyzing a lot of old news, and any good news will not become statistic for the another six to nine months.
So much to digest…
Re: How often this happens? - Posted by Rich-CA
Posted by Rich-CA on January 29, 2008 at 12:47:48:
I have looked at specific mergers as an “insider” and as a person who from time to time had to help merge the systems together. Usually there is no wholesale increase in price. There is just a one on one rumor, in which case the price increase is nearly 100%. For example, when Apple Computer stocks were trading below $30 per share (before Jobs returned) and it was rumored that IBM would be buying the company. My Apple shares went from below $30 to $45 in a week. Then I sold. My mistake because fundamentals of a company can cause it to be under valued (the company as an asset was worth more than the value of its outstanding shares).
The % of increase varies a lot and I cannot find a rule of thumb. Some industries are so lackluster that the most you see is a couple of dollars per share, unlike my Apple example.
My focus on the stock market has always been tech stock and, no, I do not play with stats for that, I know people, products, marketing plans and the conversations result in decisions. Its an industry virtually all of my friends come from and that I had worked in for more than 2 decades, so its from the perspective that stats cannot touch that I decide on stocks.
I should note: the stock does not go up after the company is purchased, it goes up before the purchase is consummated.
According to my broker, many of the stocks in certain sectors are under valued based on the worth of the companies as assets and these are all candidates for price growth. I think that in the case of the builders, we have both going on: stocks are worth less than the company as an asset BUT their industry is in such bad shape that mergers are almost a given. But as in the case of Steve Jobs returning to Apple, there is always the possibility of a joker in the deck.