The housing renaissance did not materialize the way
David Tepper
may have imagined in 2011, when he
added four of the panned home builder stocks
in the first quarter: Kb Home (
KBH
), D.R. Horton Inc. (
DHI
), Pulte Group (
PHM
) and Beazer Homes USA Inc. (
BZH
). By year-end, he sold them all again, at or near a loss - with
the exception of his Beazer holding, a fraction of which he
retained.
Now the founder of Appaloosa Management, famous for his skill
investing in distressed situations as well as stock picking, has
increased his position in Beazer Homes by almost 2700 percent. In
the third quarter he bought 1,364,369 shares of the company for
$15 per share on average. The purchase brought his total holding
to 1,415,292 shares, which is 5.75 percent of the company's
shares outstanding.
Alabama-headquartered Beazer Homes USA is the nation's
ninth-largest home builder, fashioning homes that exceed Energy
Star requirements at different price points with a variety of
floor plans and designs. In the last four quarters its stock has
rallied almost 55% on revenue improving along with the housing
market.
Beazer Homes' new home orders for the year ended Sept. 30
increased 24.8% and for the quarter ended Sept. 30 increased
10.3%, the company announced on Nov. 12.
Total revenue for the quarter increased 10.8 percent year over
year to $370.9 million, and for the year 2012 increased 35.5
percent to $1 billion.
It still reported a net loss for the quarter of $66 million, a
33.8 percent year-over-year decline, due to a large debt
repayment. For the full year it reported a net loss of $145.3
million, a 29.1 percent decline from the previous year.
The company wants to be prepared for a housing recovery and has
enhanced its balance sheet to that end. At quarter-end it had
$487.8 million in cash, increased from $370.4 million a year ago,
after several capital-raising transactions: public share
offerings of common stock, tangible equity units and senior
secured notes, Combined, the proceeds of the offerings were $466
million. It also entered into a %150 million, three-year amended
revolving credit facility to strengthen its liquidity
availability should the need arise.
Beazer has a P/B of 1.4 and P/S of 0/4, close to a one-year high.
BZH
data by GuruFocus.com
"Operationally, we generated significant growth in orders,
closings and backlog, while seeing improving trends in gross
margins. From a balance sheet perspective, we added liquidity,
improved our book value, extended debt maturities and reduced
interest expense," stated Allan Merrill, president and chief
executive officer of Beazer Homes.
Beazer is tied to a larger rally in housing stocks: The Dow Jones
U.S. Home Construction Index is up about 80% this year. In
October, housing starts were up a 41.9 percent from the October
2011 rate, and 3.6 percent higher than in September, according to
the U.S. Census Bureau.
Robert Shiller, co-creator of the S&P Case-Shiller Home Price
Index, has a skeptical view of the recovery. On CNBC this
afternoon he agreed with the CME Futures Market for single family
homes which is predicting a "steady, stable" 3 percent increase
for the next four years, which he said wasn't "leading us to a
victory or anything." "I don't expect anything exciting there,"
he added:
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