Editor's note: "Bricks and Mortar" is a mock portfolio created by reporter Nicholas Yulico that is meant to help generate real estate and gaming-related stock ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks.The housing market, no doubt about it, stinks. Government data on Monday showed that new-home sales in 2007 were the lowest on record. Nonetheless, homebuilders stocks have been surging in recent weeks as investors bet that further interest rate cuts by the Federal Reserve this week will save builders and the housing market. But I wouldn't jump into buying the homebuilders just yet, since their fundamentals are
Ryland Due for HitsIn other "Bricks" holdings, homebuilder Ryland last week reported a loss of $202 million for the fourth quarter, and new orders were down 7%. The company now has a book value of $26 per share. As the builder aggressively cuts prices to move product, I project more land writedowns are looming, resulting in further hits to book value. At around $32, the stock is trading at 1.2 times book value. In 2006 and 2007, Ryland and other homebuilders rallied prior to the Super Bowl under the belief that the spring selling season would be a good one, a notion that eventually fizzled out. I believe Ryland's stock price will retreat back to book value or lower in coming months, as investors realize that homebuilders are in for another brutal spring selling season.
Melco PBL Gains SteamMelco PBL ( MPEL), a Macau casino developer, has seen its stock price enjoy a nice pop lately because of news that the company's Crown Macau property is starting to take over significant market share in the VIP segment. I continue to rate the stock "own" in the mock portfolio. On Monday, UBS analysts said Melco PBL has been the biggest relative gainer in Macau market share during the past month. Crown has gone from 7% market share in the fourth quarter of 2007 to greater than 15% in the first three weeks of January, UBS said. Melco needs to grab increased market share in the VIP segment in order for the stock to keep moving higher, as I wrote
|Bricks and Mortar Portfolio |
A Look at How Nicholas Yulico's Picks Have Performed
|Rating Date||Price at Rating||Rating||Current Price*||Total Return**||year end 07 price||2008 YTD Return|
|Brookfield Properties (BPO)||1/23/2007||28.67||Own||20.25||-29.4%||19.25||5.2%|
|Global Real Estate ETF (RWX)||1/23/2007||64.00||Own||53.95||-15.7%||56.95||-5.3%|
|Penn National (PENN)||2/6/2007||45.56||Own||52.89||16.1%||59.55||-11.2%|
|Melco PBL (MPEL)||3/12/2007||15.46||Own||12.45||-19.5%||11.56||7.7%|
|Starwood Hotels (HOT)||7/12/2007||72.37||Own||43.84||-39.4%||44.03||-0.4%|
|Average Total Portfolio Return, Unweighted, (including closed ratings)||20.3%||1.1%|
|Closed Ratings||Rating Date||Price at Rating||Closing Price***||Return**|
|Home Solutions of America (HSOA)||4/24/2007||4.98||Flag||1.06||78.7%|
|Standard Pacific (SPF)||10/26/2007||5.25||Flag||2.20||58.1%||3.35||34.3%|
|Close At Start of Portfolio||Current Value*|
|U.S. MSCI REIT Index||1140.36||865.94||-24.1%||870.64||-0.5%|
|*(1/29/08 closing prices) |
**For "flagged" stocks, a drop in price is tracked as a positive for the portfolio, and a rise in price is a negative.
***Hilton closed out of portfolio on 10/26/07 because Blackstone Group completed purchase of firm.
HSOA closed out of portfolio on 12/26/07 at day's closing price
SPF closed out of portfolio on 1/11/07 at day's closing price