Forex Marketz Daily Forex News – Fully Markets Update
Housing data in the United States continues to come up short. The numbers have not been encouraging and two of the country’s major home builders could be facing rather sizeable short positions as they get set to announce earnings, which will not be pretty.
It would appear traders love to short homebuilders.
On Tuesday, KB Home (KBH: NYSE) will release their earnings. According to a Markit report, this is the most shorted company on the U.S. stock exchanges. Another building company investors love to short is Lennar (LEN: NYSE) and they are reporting earnings next week as well.
These are Highly Leveraged Companies
Nearly 16 percent of KB home shares are outstanding on loan. This number has shrunk over the last few months, but remains high. As home building figures continue to disappoint and come in soft in the world’s biggest economy, short bets against home builders are growing. In November, applications to build new homes fell by 22 percent. Not a good sign.
Another tick against home builders is the selloff in crude oil. Some parts of the United States, which have seen recent solid economic growth, are tied to oil production. As that comes to an end, builders will feel the pressure. This will put downward price pressure on their stocks.
The Room for Growth is not that Strong
All the news is not bad, some analysts, I am not one of them, see opportunities for growth. If you are long now, just be watchful, as things can turn in a hurry. Even if stocks like KB Home are seeing some support from home sales data, this will not last long. Especially since recent credit ratings announcements will not equate to stronger demand once the spring selling season starts in the U.S. housing market.
With that in mind there is one other company that could be a good long term short. Take a look at People’s United Financial (PBCT: Nasdaq). The number of shares they have on loan is 14 percent and the number of short trades has shot up 10 percent over the last month.
