Inflection Point For Homebuilders

Freed, Dan
December 2005
Investment Dealers' Digest;12/5/2005, Vol. 71 Issue 46, p12
Trade Publication
The focuses on the fall in the stock prices of the companies in the housing sector in the U.S. Unhappy shareholders want the builders to stop buying land in this volatile real estate market. They are insisting that the builders should use their cash reserves to buy their stock back. A wave of consolidation in the industry is expected. The market share of the top ten homebuilders has grown drastically over the past five years. Some of the smaller players looking to cash out could turn to financial buyers. Leveraged buyout are very rare in this industry. Beazer Homes has been pressured by Tontine, a hedge fund. Its shares surged to $65 on November 12, 2005 in anticipation of a share repurchase announcement. The company's board authorized a 10 million-share buyback, amounting to a staggering 24 per cent of its 41.7 million shares. The increase in the prices of the shares of Beazer could inspire more buybacks. Hedge fund investors that have significant holding can force the companies like Centex, KB Home and Ryland to follow the suit.


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