mrmarket
10-16-2003, 01:32 PM
The combination of low interest rates, low unemployment, and low inflation does very well for homebuilding demand. What happens if you demand for houses goes up? You sell more houses.
Today I bought WLS (William Lyon Homes ) at 54.10. I will sell it in 4 to 6 weeks at 62.53. Ok, I admit it. This is an industry play. However, WLS is first among equals, in my not so humble opinion.
Here’s why I like WLS:
The stock price of WLS is up over 160% in the last 12 months yet its P/E is still less than 10. Is it safe?? With a P/E of 10?? Doy!
Last year a million homes were sold. We’re not talking about selling Pet Rocks. Houses are worth a lot of money. If you sell a lot more houses, you make a lot more money. Furthermore, the rate of homeownership is going up as well, meaning that a greater percentage of people are homeowners now. Owning a house is great. You can play your stereo loud. You can pee on the trees in your backyard and no one can say anything. Well, you might get a thrown shoe in the back of your head, but that’s only if your wife has good aim.
WLS builds houses in America’s hotbed: California, Arizona and Nevada. Did I tell you I just got back from Nevada?? I smoked cigars, drank a 1000 beers, played golf, ate steakey wakey and won thousands of dollars betting college football. You? You?? YOU???
William Lyon targets entry-level and move-up buyers, with prices ranging from $100,000 to $1 million. The average home price is $300,000. They presently have a HUGE backorder of these homes.
They recently announced preliminary net new home orders and
backlog information for the three months ended September 30, 2003
which were at the highest levels for any quarter in the Company's
history. Net new home orders for the quarter ended September 30, 2003 were a record 977, an increase of 96%, as compared to 499 for the quarter ended September 30, 2002. So let’s see….977 times $300,000 equals $293,000,000 dollars of revenue. That’s 50% of their annual revenue just from backorders alone!! Whhooooo mama!
Speaking of revenues, they’ve grown steadily at a rate of 15% per year over the last 4 years. Remember…this is all through a very soft period in our country’s history. When things get better (and they will get better) WLS’s growth will increase commensurately.
Consistent with this revenue growth, WLC has seen its earnings grow and grow. $$$MR. MARKET$$$ projects 2003 earnings to be $6.91/share. At today’s P/E of 9.66, this projects to a share price of $66.75, which exceeds my target. Most likely, once we see confirmation of 3Q earnings, the street will allow the P/E of WLS, and other homeowners to expand, and its stock will hit my target that much faster. The industry average P/E is already 14.
How good is WLS?? What do you make of an ROE of 28.7% vs. industry average of 16.2% and an S&P average of 9.1%??
But don’t take it from me…listen to the Lyon roar: “We are proud of the results for the second quarter of 2003. The number of new orders during the quarter is a record for any quarter in the Company's history and the backlog at June 30, 2003 is a record for any quarter in the Company's history."
Wade H. Cable, President and Chief Operating Officer stated: "The
Company has increased its number of sales locations from 30 at
September 30, 2002 to 46 at June 30, 2003.” This means they have increased their sales locations by 50%. They wouldn’t be putting their money out there for this activity if they haven’t already done their homework on where the homebuying will take place.
The real ace in the hole here is that consolidation is rampant in this business. Now..the chairman and CEO is William Lyon and he’s 80 years old. He is a retired USAF General. No question he kicked butt in his day (and probably still does). His kid is also William Lyon and he’s only 29 years old and has a senior position at WLS. He is a smart kid, he went to Stanford and is probably heir to the WLS throne. Now do you think this rich kid wants to build homes for the rest of his life, or do you think he’d rather cash out and take his money with a yacht anchored in the Carribean with an all female crew? So…if Ryland or NVR comes by and offers a fair price of $70/share for WLS, what do you think Junior is gonna do?? Well, here’s what $$$MR. MARKET$$$ would do ==> “Play that steel drum….more cracked crab please!”
Today I bought WLS (William Lyon Homes ) at 54.10. I will sell it in 4 to 6 weeks at 62.53. Ok, I admit it. This is an industry play. However, WLS is first among equals, in my not so humble opinion.
Here’s why I like WLS:
The stock price of WLS is up over 160% in the last 12 months yet its P/E is still less than 10. Is it safe?? With a P/E of 10?? Doy!
Last year a million homes were sold. We’re not talking about selling Pet Rocks. Houses are worth a lot of money. If you sell a lot more houses, you make a lot more money. Furthermore, the rate of homeownership is going up as well, meaning that a greater percentage of people are homeowners now. Owning a house is great. You can play your stereo loud. You can pee on the trees in your backyard and no one can say anything. Well, you might get a thrown shoe in the back of your head, but that’s only if your wife has good aim.
WLS builds houses in America’s hotbed: California, Arizona and Nevada. Did I tell you I just got back from Nevada?? I smoked cigars, drank a 1000 beers, played golf, ate steakey wakey and won thousands of dollars betting college football. You? You?? YOU???
William Lyon targets entry-level and move-up buyers, with prices ranging from $100,000 to $1 million. The average home price is $300,000. They presently have a HUGE backorder of these homes.
They recently announced preliminary net new home orders and
backlog information for the three months ended September 30, 2003
which were at the highest levels for any quarter in the Company's
history. Net new home orders for the quarter ended September 30, 2003 were a record 977, an increase of 96%, as compared to 499 for the quarter ended September 30, 2002. So let’s see….977 times $300,000 equals $293,000,000 dollars of revenue. That’s 50% of their annual revenue just from backorders alone!! Whhooooo mama!
Speaking of revenues, they’ve grown steadily at a rate of 15% per year over the last 4 years. Remember…this is all through a very soft period in our country’s history. When things get better (and they will get better) WLS’s growth will increase commensurately.
Consistent with this revenue growth, WLC has seen its earnings grow and grow. $$$MR. MARKET$$$ projects 2003 earnings to be $6.91/share. At today’s P/E of 9.66, this projects to a share price of $66.75, which exceeds my target. Most likely, once we see confirmation of 3Q earnings, the street will allow the P/E of WLS, and other homeowners to expand, and its stock will hit my target that much faster. The industry average P/E is already 14.
How good is WLS?? What do you make of an ROE of 28.7% vs. industry average of 16.2% and an S&P average of 9.1%??
But don’t take it from me…listen to the Lyon roar: “We are proud of the results for the second quarter of 2003. The number of new orders during the quarter is a record for any quarter in the Company's history and the backlog at June 30, 2003 is a record for any quarter in the Company's history."
Wade H. Cable, President and Chief Operating Officer stated: "The
Company has increased its number of sales locations from 30 at
September 30, 2002 to 46 at June 30, 2003.” This means they have increased their sales locations by 50%. They wouldn’t be putting their money out there for this activity if they haven’t already done their homework on where the homebuying will take place.
The real ace in the hole here is that consolidation is rampant in this business. Now..the chairman and CEO is William Lyon and he’s 80 years old. He is a retired USAF General. No question he kicked butt in his day (and probably still does). His kid is also William Lyon and he’s only 29 years old and has a senior position at WLS. He is a smart kid, he went to Stanford and is probably heir to the WLS throne. Now do you think this rich kid wants to build homes for the rest of his life, or do you think he’d rather cash out and take his money with a yacht anchored in the Carribean with an all female crew? So…if Ryland or NVR comes by and offers a fair price of $70/share for WLS, what do you think Junior is gonna do?? Well, here’s what $$$MR. MARKET$$$ would do ==> “Play that steel drum….more cracked crab please!”