Market players might have been puzzled this morning about research that gave hold ratings for three homebuilders and a buy on three others, Jim Cramer said on TheStreet.com TV's Wall St. Confidential Web video Tuesday.
Soleil Securites rated
Cramer joined the show's host, Farnoosh Torabi, to break it down and give his own ranking of the homebuilders.
Cramer: Toll Tops the Homebuilders
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"I don't see the difference between Lennar, D.R. Horton and Pulte," he said. "I think those are very similar." Cramer said he also believes Centex and KB Home are actually better.
According to Cramer, the only buy is Toll Brothers, because its balance sheet is totally intact, and people don't have to worry about a cut in the dividend. The others, he said, he would sell.
Among all the homebuilders, Cramer said
is the worst, then
. "Those are the two most likely to go belly up," he said.
Cramer said he then would put D.R. Horton, Pulte and Lennar in the same class. "I don't like them," he said. "A little bit above them I would put Centex and KB Home," the latter of which has "a very big cash position." At the top, said Cramer, is Toll.
"If you really think that housing is going to bottom within the next six months, and I don't -- I think it's going to bottom in the next 12 to 18 months -- you want to start buying Toll between say $16 and $18," he advised. Toll was trading around $18.50 during the afternoon.
When Soleil Securities issued these ratings, it probably considered that the HGX Housing Index has come back to where it was in 2002, when the bubble began, Cramer said. Plus, not all these companies have financial problems, and if the
starts cutting interest rates aggressively, market players are going to want to be in these stocks. Also, these stocks have come down so much that it's too late to issue sells, he added.
"My balance sheet work tells you that I don't want to be in Horton, Pulte and I particularly don't want to be in Standard Pacific or Beazer, but I'm not against this call because it's against the grain," Cramer said. "I don't know anybody who thinks housing is going to be good next year, so perhaps that's too negative. This is a contrarian piece and I always like contrarian research."
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