March 23, 2007: Snooping around the homebuilding stocks

Any time a group of politicians decides to hold hearings on a national menace (their view, not mine), I look at the situation as a signal to investigate on my own. I assume that the political posturing is usually at the end of a problem, and not the beginning. News cycles, ditto.

Home builders, hand-in-hand with sub prime mortgages, have been beaten like rented mules over the past couple of months. For good reasons. Now, I think it is time to look beyond and see what the future holds for the stronger plays in the home building industry.

That said, there has been a noted increase in shorts on home builder stocks, as well as furniture companies and financials in the sub-prime swamp. I believe that the home builders' shorts will have to cover by mid-summer (and shorts are actually down since September 06), when it is possible that the Fed may lower interest rates a notch.

Here is my list of housing stocks and their minions that stand to benefit first from the rebound:

Fortune Brands (FO)
Interline Brands (IBI) -MY PERSONAL FAVORITE
Lennar (LEN)
M.D.C. Holdings (MDC)
M/I Homes (MHO)
NVR (NVR)- BARELY MADE THIS LIST
Standard Pacific (SPF)
Stanley Works (SWK)

This is a small list, but I did not want to minimize problems with the industry. Bad things will happen to financially weak or management poor companies.