This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Housing Top Was Sweet for KB Home Pair

Karatz went on CNBC to dismiss talk of a housing bubble. How long could the "near perfect" market continue, his host asked? "Well, I think it can last a lot longer than the skeptics believe," he replied. Karatz predicted strong demand would continue as new migrants flooded into the booming areas in the South and West. He noted that interest rates remained favorable.

"I think the combination of those two factors make for a very good picture for homebuilders for the foreseeable future," he declared.

For good measure, he also dismissed suggestions that his company, and others, were building too many homes. "We're talking about a relatively small percentage increase over what happened 15 years ago, when our population was much smaller."

Karatz also went to a Reuters real estate conference in New York, and calmed the fears of anyone worried about all the subprime lending and adjustable-rate mortgages behind the market. Most people taking out ARMs are "capable buyers," he told the conference. And of all those using ARMs simply to increase their leverage, he added: "I'm not quick to say it's imprudent."

Ouch.

KB Home shares responded to all the great news, soaring above $80 in July. What's interesting, though, is how Karatz and Mezger, his chief operating officer at the time, were acting. While Wall Street bulls were bidding up their stock, they were taking profits. On July 7 and July 8, 2005, Mezger exercised 369,292 share options and then sold the shares at an average price of around $77. And a week later, Karatz did the same with 950,000 options, getting an average price of just over $80.

4 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,919.59 +80.85 0.48%
S&P 500 1,981.60 +9.86 0.50%
NASDAQ 4,527.5140 +19.2020 0.43%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs