Homebuilders Buck Market Trend
It has been a tough week for many sectors, but there were several homebuilders that actually held their own and are up on the week.
is having a good week so far, up nearly 10%.
, a name we just added to our "Recommended" list last night, is also having a good week. The catalyst for these moves could be a drop in mortgage rates, brought about by the Fannie and Freddie bailouts. Since Monday, mortgage rates for a 30-year fixed loan have come down from 6.52% to 6.19%.
The bailouts for
are adding fuel to the rumors that the government will do whatever is possible to keep a plethora of foreclosures from hitting the markets and keeping current unsold inventories from moving higher. The market seems to be telling us that the plan, at least for the short term, may help the builders. We are not ones to fight the tape, so we like the price action in both KBH and PHM.
KB Home is a "Recommended" dividend stock, holding a Dividend.com Rating of 3.5 out of 5 stars. Pulte Homes is a "Recommended" dividend stock, holding a Dividend.com Rating of 3.5 out of 5 stars.
Yamana Gold Tries to Buck Metal-Price Breakdown
Today, gold prices may be having a positive close for the first time this week.
Gold prices ended last week at $802.80, and are on track to lose nearly $40 more this week as we head into the afternoon session. We have been following
as a gauge for the gold-mining sector. The stock closed last week at $9.22 and is trying to hold the $8 level in today's trading. The stock hit a new 52-week low on Wednesday of $7.27, although the uptrend clearly broke on the name a while back.
Long-term investors will need to put Yamana Gold on the bench for now as gold prices and the stock itself search for a solid bottom. Shorter-term investors will need to have good timing in the name, and our indications are that below the $8 level will be a key area where shorter-term investors may attempt to nibble. We would remain on the sidelines either way.
Yamana Gold is not recommended at this time, holding a Dividend.com Rating of 3.0 out of 5 stars.
Former Dividend Payers May Receive Federal Loans
may be next in line for federal monies.
The auto industry is working to secure up to $50 billion in government loans over the next three years, according to various news reports today. The funding is supposed to help the auto manufacturers modernize factories and develop more fuel-efficient vehicles. Congress had authorized $25 billion in loans in last year's energy bill but has not yet funded the program.
It will be interesting to see the terms of such an agreement, and how the government authorizes the money to be spent. It would be great to see American auto makers get back on their feet, but the plan has to make sense. The plan will also need to address the structure of how the companies' ballooning pension funds will be sustained. We do not have ratings on GM or Ford, since both companies have done away with their dividend payouts in recent years.
Commodities Bounce for a Second Day
Short-term investors have been seeing commodities coming back to life for the past couple of days. The threat of Hurricane Ike is no doubt causing some nervousness in positions where investors previously had taken the short side of the trade.
You are seeing stocks like
snapping back from earlier week losses. The key for these stocks is getting back to the levels where they ended last week at. We were looking for this rally earlier in the week, but the continued hedge fund selling, as some have estimated, was evident on Monday and Tuesday.
For long-term investors, the commodity names mentioned above have broken their upward momentum that had been in place for the last few years. The stocks have now become more of a short-term vehicle for investors who will attempt to time their purchases for shorter-term gains. The worldwide economic slowdown proved to many that commodities do indeed trade in cycles, contrary to the "new paradigm" that market pundits had been declaring.
Potash is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.2 out of 5 stars. Arch Coal is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.0 out of 5 stars. CF Industries is not a recommended dividend stock at this time, holding a Dividend.com rating of 2.9 out of 5 stars.
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At the time of publication, the authors had no positions in stocks mentioned, although positions may change at any time.
Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.