NEW YORK ( TheStreet) -- Homebuilding quiz: How many of the public homebuilders can virtually guarantee reaching profitability in 2010?
The answer: one, and only one.
Sad to say, but when it comes to forecasting profitability in 2010, one is the loneliest number in the homebuilding sector.
Indeed, the level of uncertainty is so great when it comes to the homebuilding stocks headed into 2010 that only NVR (NVR) can be expected to turn a profit in 2010.Considering that NVR is the only homebuilder to turn a profit in consecutive quarters -- many of them, actually -- it is not going out on much of a limb to make this call for 2010. What has allowed NVR to separate itself from the woeful homebuilding sector? Carl Reichardt, an analyst with Wells Fargo said the reason for NVR's massive outperformance of the sector over the past two years is, for one, the fact that the homebuilder doesn't own land, but only options on land, so when the downturn came NVR was not forced to writedown a substantial portion of assets. NVR also is concentrated in the northeast and Washington D.C., and lacks exposure to the worst housing markets out West. The second key component of the NVR strategy is the vertical integration of its business. NVR has significant control over building materials, logistics and its building network, and that allows NVR to be much more efficient than peers, Reichardt noted. "The margin on the house itself is what they earn as opposed to
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