Since late 2005, our nation’s homebuilding sector has been losing ground at a sometimes alarming rate. Despite several temporary reversals in overall momentum, the general trend has carried the sector down over 77 percent in the last three years, leaving many long-term investors disheartened and utterly frustrated.
This has caused something of a snowball effect in the industry. When any surge in price has occurred, nervous investors have been waiting with their fingers on the “sell” button in the hopes of escaping a nightmare. The problem with this philosophy is that it does little more for the overall picture than drive stock prices down even farther.
Some experts, like Ian Davis of Stansberry Research’s Growth Stock Wire, believe that we may finally be witnessing the beginning of the end of what he refers to as a “bloodbath” in the homebuilder market. This is the point where many investors begin to see the value in establishing new positions in anticipation of the sector’s recovery.
As far as book values are concerned, we are looking at bargain-basement prices, although Mr. Davis warns that prices could fall farther still: “When all the investors who lost their shirts are out of the market – the sector becomes completely forgotten and left for dead. That will be the time for value investors to swoop in and make a killing.”
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