Quantcast
I have 23 consecutive profitable trades of 15% or better. How is this possible? Every day there are hundreds of stocks setting new highs, no matter what happens in the overall market. Many of these stocks are still at very reasonable valuations. Afraid of buying stocks at their highs? Think of it this way: a new high is really a future floor for companies with solid financial underpinnings. Quantitative momentum modeling makes it easy to identify stocks that can continue this upward momentum trend. Why does this happen? It's really very simple..ask me about what investors and cows have in common. I am $$$ MR. MARKET $$$. I AM HUGE!!! Bring me your finest meats and cheeses. You can join in on the fun. Register for free and you'll be able to post messages on this forum and also receive emails when $$$ MR. MARKET $$$ makes his own trades. ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
Page 1 of 3 123 LastLast
Results 1 to 10 of 28
  1. #1

    Default NVR ==> The Tax Cut Winner

    ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)

    "On the house" means that "the house" (the bar, pub or establishment) pays for the drink. It's a free drink. If you are puzzled by "on", it's used in the same way as "The drinks are on me!", it's an idiom meaning I will bear the cost; I will buy them. Why are we drinking anyway?

    Is everything beautiful on the horizon? Unemployment is low, interest rates are low, stock market is at an all time high and the government says you can keep more of your hard earned wages. What is there left to do then? How about buying a house?

    Today I bought stock in NVR, Inc (NVR) at a price of $3509.57. I will sell it in 4 to 6 weeks at $4043.03. Here’s why I like NVR:





    That’s right….this is a ridiculously beautiful chart. I mean, it’s perfect. There is nothing wrong with it. NVR’s stock is up 111% for the year (that’s something like 9% per month, chugging upwards every month). The stock is up over 5000% since the year 2000. However, even with this amazing price performance, its PE is only 25. Why? Because this company is making lots of money, that’s why. So now you have to ask yourself, why is this company making so much money? It starts with the homebuilding market.

    For 2018, expect improving demand, supporting sales growth. Fundamental demand for new homes will continue to improve while the supply of new homes remains tight. The forecast for 2018 is for 1.3 million U.S. housing starts. As a result, home prices will appreciate further. Prices were up 5- 10% in 2017 and they will climb more next year.

    Of course Hurricane’s Harvey and Irma tamped down on 2017 housing demand. So 2018 will be like taking the lid off of the jack in the box. We’re seeing it now. In October 2017, new home sales reached their highest level in 10 years. October 2017 also marked the third straight month of increasing new home sales after remaining relatively flat through the beginning of 2017. The stock market is on to this as homebuilder stocks were rewarded with an average appreciation of 64%, the best since 2003. The recent tax reform will of course lop on a healthy 10 – 20% increase of earnings to the bottom lines of these companies. Homebuilders are going nuts, and a lot of these companies have good looking charts. The basic story line is that the builders are not only cheap but are doing well and have good future prospects. There are lots and lots of customers.

    Total housing inventory declined 6.5% year over year to 1.88 million, so there are more home buyers yet fewer homes. The US economy is growing at over 3%. This is going to heat up interest in home buying. If you look at the price to book ratio of homebuilders, it currently has a trailing 12-month P/B ratio of 1.8. This is a discount to the overall market, which has a current P/B for the S&P 500 of 3.8.

    NVR, Inc. operates as a homebuilder in the United States. The company operates through four segments: Mid Atlantic, North East, Mid East, and South East. It primarily constructs and sells single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, and Heartland Homes names. The company markets its Ryan Homes products to first-time and first-time move-up buyers; and NVHomes and Heartland Homes products to move-up and upscale buyers. It also provides various mortgage related services to its homebuilding customers through its mortgage banking operations; provides title insurance; and performs title searches in connection with mortgage loan closings. The company was founded in 1979 and is headquartered in Reston, Virginia.

    So we know that the homebuilders are a bargain here, but what about NVR? NVR has a mortgage company which it uses to close the deals on its houses. Here’s what one customer had to say about NVR Mortgage.
    “I purchased home through RyanHome, and getting mortgage service through NVR Mortage had several advantages.
    1. They are part of NVR parent company, so the entire home purchasing process was seamless. Communication among NVR team including sales, mortgage and settlement was smooth and I did not have to be the coordinator.
    2. Competitive rate. I shopped around for costs and rate, but NVR's offer was the most competitive.
    3. You can reach the office w/o any automated intro.
    Matt Zuczek was my loan officer, and I am pleased with his service as he was friendly and professional. He's easy to reach via text messages and emails. When he was not available, I left him voice message, and he got back to me within reasonable time frame. My settlement was postponed for few days due to my mistake, but Matt and his team extended my rate lock period, which was fantastic. I strongly recommend NVR Mortgage!”

    (Matt Zuczek must be THE MAN!)

    The undersupply of homes for sale in the US will certainly help NVR as well. You may remember that the housing collapse 10 years ago was stimulated by an OVER supply of housing. We’re in the opposite situation now. Since the financial crisis homebuilders were all scared to increase production and new housing supply fell short of demand every year since 2009. We are seriously short houses now.

    What NVR does well is employ critical mass as part of its marketing strategy. This is company with a market cap of 13 billion. No small player. NVR is usually the primo builder in each of its markets, and this scale gives it a competitive advantage in its relationships with land developers and also amortizes its fixed costs across multiple developments in any one region.

    NVR also operates a little differently than most of the other homebuilders. Rather than buy and hold land, NVR buys options to buy land. That means it can extend its capital employment over a number of markets while focusing its investment capital in regions which have the most potential. Meanwhile, its balance sheet is highly liquid and not loaded with debt because they aren’t sitting on all of this undeveloped land. Also, there will be labor shortages which means that the premier homebuilders will be able to maintain their gross margins whereas the builders with less labor influence will have to pony up for workers.

    How does this translate into earnings? NVR has a historical (3-5 year) EPS growth rate of 30% compared with the industry average of 19%. The projected long term growth also is in double digits for both sales and earnings. NVR's trailing 12-month return on equity (ROE) supports its growth potential. ROE in the trailing 12 months is 38.2%, compared to the industry average of 12%.

    So where will the fuel for the future come from? Millennials in our general population are more numerous than baby boomers. So we have housing starts that were below average and new demand coming in – that’s right – these Millenials are going to start buying houses. Their parents are sick of yelling at them and they are sick of hearing it. They have money, don’t want to pay rent and certainly don’t want to live with their parents anymore. Millenials will do what all people have done since we started taking notes…they will want to buy houses.

    Meanwhile, NVR is seeing 12% Net Operating Profit After Tax CAGR since 2009 and a Return on Invested Capital of 22%. If ROIC stays over 20%, we’ll continue to see double digit earnings growth rates. It has to be that way..there is no where else for the money to go. It’s really a very simple business.

    Net income for its third quarter ended September 30, 2017 of $162,102,000, or $38.02 per diluted share. Net income and diluted earnings per share for the third quarter ended September 30, 2017 increased 38% and 34%, respectively, when compared to the 2016 third quarter net income of $117,392,000, or $28.46 per diluted share. Consolidated revenues for the third quarter of 2017 totaled $1,667,920,000, an 8% increase from $1,537,569,000 in the third quarter of 2016.

    For the nine months ended September 30, 2017, consolidated revenues were $4,489,504,000, a 10% increase from $4,069,778,000 reported for the same period of 2016. Net income for the nine months ended September 30, 2017 was $412,902,000, an increase of 50% when compared to the nine months ended September 30, 2016. Diluted earnings per share for the nine months ended September 30, 2017 was $98.33, an increase of 48% from $66.24 per diluted share for the comparable period of 2016.

    Check out the historical performance:
    2016 2015 2014
    Revenue 5.8 5.2 4.4
    Earnings 425 383 282

    There’s really not much more you can say, other than that the last 4 quarters had revenue of $6.4 billion and earnings of 561 million – a big improvement over the calendar year 2016. Just go back and look at the chart, and the earnings are painting that picture.

    NVR knows this, and because of that, is always buying back its stock. Over the past five years, NVR has reduced its share count by 30%. What’s also awesome is that NVR doesn’t give guidance to the ANAL-ysts. They are left to figure it out all on their own. So the ANAL-ysts are predicting revenues of 7.3 billion in 2018 which will yield earnings of $169 per share. $$$MR. MARKET$$$ thinks that the revenue estimates are pretty close…they’ll be 7.4 billion….however housing price increases are going to grow margins for them and they will have EPS boost up to $181. If you take the $181 and multiply it by the PE of 25, you get a share price of $4525, which is well past my selling target.

    Here’s what the Chairman of the Board and the CEO had to say:

    “NVR’s strong financial performance is due in large part to our disciplined adherence to our business model, which is focused on maximizing liquidity and minimizing risk. Unlike our major competitors, our sole business is selling and building quality homes, without the risk of owning and developing land in a cyclical industry. The liquidity generated by this business model has been employed by NVR to grow our business while continuing our history of returning excess capital to our shareholders through our share repurchase program….. We take great pride in our reputation as a company that places the customer first. In fact, over 95% of our customers are so pleased with NVR that they would recommend us to family and friends. Customer service ratings at these levels are a reflection of the quality of our employees, our products and our service. Treating our customers this way is important to us and the only way we choose to do business…. We look forward to 2017, and are excited about what lies ahead. We firmly believe that our focus on customer satisfaction, our proven business model and our dedicated team of employees and business partners differentiate us from our competitors and provides the foundation for a successful and profitable 2017.”

    Well you have to pony up big bucks to buy shares of this stock…but as Titans say when they are at the casino, you have to bet big to win big and in a few months I’ll be cashing out this next big winner. Meanwhile, I’ll be in Atlanta for the College Football National Championship and the drinks will be on “the house.”

    I am HUGE!

    $$$MR. MARKET$$$
    Last edited by mrmarket; 01-23-2018 at 11:03 AM.
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  2. #2
    Join Date
    Oct 2003
    Location
    Hamilton MA
    Posts
    1,947

    Default

    A fine choice, Large Person. Good luck and Happy New Year.

  3. #3

    Default

    Quote Originally Posted by Louetta View Post
    A fine choice, Large Person. Good luck and Happy New Year.
    Thanks Louetta...great pic.
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  4. #4
    Join Date
    Mar 2006
    Location
    Sacramento, CA
    Posts
    920

    Default

    Nice pick. I have NVR in my portfolio too. I found NVR by accident two years ago. Good Luck and Happy New Year.

  5. #5
    Join Date
    Oct 2003
    Location
    Hamilton MA
    Posts
    1,947

    Default

    Quote Originally Posted by mrmarket View Post
    Thanks Louetta...great pic.

    Thank you.

  6. #6
    Join Date
    Jun 2009
    Location
    NJ
    Posts
    565

    Default

    Bought NVR at the open this morning (9:30:10 am) at $3410 and excited about the climb towards and over $4000; with Mr. Market the Sherpa of this mountain of a chart!
    .

  7. #7
    Join Date
    Sep 2003
    Posts
    4,745

    Default

    Great pick, $$MM!! I'm in with you at $3420 (got a bargain on the dip this morning) and am sure we'll see this hitting $4000 in no time!

  8. #8
    Join Date
    Nov 2003
    Location
    ohio
    Posts
    8,898

    Default

    I've got my bid in, but not at the deal you got. Put in an extra 0 in my order . Almost blew my computer. You're talking big $$, Mr.Market $$. Finally got NVR at 3630. I'd be surprised not to see $4000 rather soon.

    ---------------billy
    Last edited by billyjoe; 01-23-2018 at 01:20 PM. Reason: Bought NVR

  9. #9
    Join Date
    Jan 2018
    Location
    Southold, NY
    Posts
    2

    Default

    First let me say, all due respect to your Hugeness, I have been a long time lurker and was even around for some of the IBD wars back in the day. I have always been an admirer of what you are doing here and have also long wondered why your methods caused some people to just have a mental breakdown. They have come and gone. Mr Market remains -- and he is HUGE! A shipment of my finest meats and cheeses are on the way!

    On to NVR. I had to comment on this stock because it is illustrative of the one problem I have with this system. The tendency to not get rid of stocks that have broken your rules. It is not your fault that NVR just had a lower than expected earnings report, that sometimes happens. You certainly are not in the boardroom meetings about upcoming earnings, and your calculations can only stack the deck in your favor, not create 100% accuracy.

    Now that NVR has had a lower than expected earnings report and no longer fits the original criteria wouldn't it be better to take the small loss and move the money into the next pick? I know the consecutive stock picks thing is important to you, but can't you just say consecutive stock picks that remain within the rules? Or is it really better to hold until it does turn itself around? I know it is still a good company, it just might not be HUGE anymore.

    Respectfully submitted for your consideration.
    Neal

  10. #10

    Default

    Quote Originally Posted by NealC View Post
    First let me say, all due respect to your Hugeness, I have been a long time lurker and was even around for some of the IBD wars back in the day. I have always been an admirer of what you are doing here and have also long wondered why your methods caused some people to just have a mental breakdown. They have come and gone. Mr Market remains -- and he is HUGE! A shipment of my finest meats and cheeses are on the way!

    On to NVR. I had to comment on this stock because it is illustrative of the one problem I have with this system. The tendency to not get rid of stocks that have broken your rules. It is not your fault that NVR just had a lower than expected earnings report, that sometimes happens. You certainly are not in the boardroom meetings about upcoming earnings, and your calculations can only stack the deck in your favor, not create 100% accuracy.

    Now that NVR has had a lower than expected earnings report and no longer fits the original criteria wouldn't it be better to take the small loss and move the money into the next pick? I know the consecutive stock picks thing is important to you, but can't you just say consecutive stock picks that remain within the rules? Or is it really better to hold until it does turn itself around? I know it is still a good company, it just might not be HUGE anymore.

    Respectfully submitted for your consideration.
    Neal
    I still like NVR and, as a result, continue to hold it. No other reason.
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  




Do you like this site?

Go to the homepage of
$$$ MR. MARKET $$$