A week ago I reiterated that Citigroup (C) ($50.61 vs. $48.60 on May 10) was the only buy rated money center or regional bank and that investors should consider booking profits on strength to my monthly risky level at $51.61. This week's high has been $51.45.
A week ago I also presented additional downgrades to homebuilder stocks and additional downgrades occurred this week.
On Wednesday the National Association of Home Builders' Housing Market Index (HMI) showed an uptick of three points to 44 in May, still below the neutral 50 reading. The NAHB noted increasing urgency among potential buyers of new homes given low inventory, low mortgage rates and improving local economies.
On Thursday housing starts for April came in at an annual rate 853,000, below the 973,000 consensus estimate, and down 16.5% from the pace of March. This news was partially offset by a strong gain in building permits, led by future production of multifamily housing.
The homebuilders are most concerned about single family starts, which fell by 2.1% to an annual rate of 610,000, just above the key 600,000 level. Factors holding back home construction are limited access to construction credit, tight qualification standards for mortgage borrowers, the rising costs of building materials, developable lots and finding suitable labor.
Beazer Homes (BZH) ($21.47 vs. $20.17 on May 10): Has been downgraded to strong sell from sell as the stock a new 2013 high at $22.63 on May 15. DR Horton (DHI) ($26.80 vs. $26.82 on May 10): Has been downgraded to strong sell from sell as the stock a new 2013 high at $27.74 on May 15. KB Home (KBH) ($23.88 vs. $24.16 on May 10): Has been downgraded to sell from hold as the stock set a new 2013 high at $25.14 on May 15. PulteGroup (PHM) ($23.35 vs. $22.85 on May 10): Has been downgraded to strong sell from sell and set a new multi-year high at $24.47 on May 15.
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