Saturday, August 2, 2008

Quote of the Day - Centex Corp. (CTX)

Quote of the day comes from the Centex Corp. (CTX) conference call that was held on July 30, 2008.

"Conditions in the housing market worsened in the quarter and we don't see any improvements in market conditions for remainder of this fiscal year. Foreclosures are arising dramatically in most markets, employment growth is slowing. Mortgage rates are on the rise and we're seeing stricter mortgage qualification requirements for home buyers. Energy costs have increased substantially for our subcontractors, suppliers and customers."

Timothy Eller - Chairman and Chief Executive Officer of Centex Corp.

4 comments:

Saj said...

Due to the pessimism out there, many home builders are trading at discounts to their book values (i.e. land and homes which they own)...do you view this as a possible value investment?

Eric J. Fox said...

Saj...I don't think it is time yet to buy. Book values continue to fall so it is hard to use this as a valuation backstop. The group will retest its bottoms soon and break through on the downside.

Saj said...

Hi Eric,

What kind of signs would you look for to be able to tell the right time to buy them? House prices stop dropping?

Eric J. Fox said...

I think if you wait until prices stop dropping it would probably be too late. It would be nice to have some signs of the declines slowing. Horton reported yesterday and wrote down $330 million in impairments. This is on total equity of $3.6 billion. It's hard for me to use price to book value as an investment thesis while this book value is still falling quarter after quarter.