Macro Tsimmis

intelligently hedged investment

Beazer Homes (BZH) update #11

Posted by intelledgement on Sun, 10 Aug 08

Beazer Homes (BZH), the homebuilder we have sold short, announced 3Q08 results Friday and while it was a seventh straight quarter of substantial losses, and while there were big double-digit Y-O-Y declines in new home orders (-37% compared to 3Q07), closings (-42%), and revenues (-40%), there were a few glimmers of hope.

First, while the company lost another $109.7 million in the quarter, this was not only their smallest loss in over a year, but a slight Y-O-Y improvement—they lost $118.9 million a year ago—the first time that metric had ticked northwards (if that is a fair way to characterize a smaller loss that still amounted to over $100 million!) in over three years.

The stock was up 3% on the day to close at $6.10…and is up 60% in the past week on optimism that the housing market may be bottoming. We are still ahead 44% at this level and it is tempting just to cash in our chips and declare victory here—but we remain depressingly expectant that the road ahead is going to get bumpier for everyone, and that there is no hidden armada of prospective home buyers lurking around the next corner. On top of that, the unresolved SEC and DOJ criminal investigations remain open.

In these circumstances, we expect to do better on this short position, so we are staying the course here.

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