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  1. #1

    Default MDC ==> The ICE ICE BABY Winner

    When I was a kid, one of my simple pleasures was to go ice skating. We had a skating rink on the VFW Parkway very near my house. It was called the MDC rink. My mom bought me figure skates that were on sale from Value Village. Of course they were two sizes too small, and all of the other kids had hockey skates. That didn’t bother me. I’ll never forget the smell of the popcorn and the hot chocolate at that rink. It was fun skating with my parents and siblings. The best part was the feeling of freedom when I took my skates off and my feet stopped hurting.

    Yesterday I bought stock in M.D.C. Holdings, Inc. (MDC) at a price of $60.04 per share. I will sell it in 4 to 6 weeks at $69.35. Here’s why I like MDC.



    Yes…that’s the MDC chart. Isn’t it simply amazing? All MDC wants to do is go up and up and up and up. This stock is up 146% over the past 52 weeks, yet it’s PE ratio is only 11.5 AND it pays a 2.2% dividend. I like dividends. It’s like getting free quatloops.

    M.D.C. Holdings, Inc., through its subsidiaries, engages in the homebuilding and financial service businesses. Its homebuilding operations include purchasing finished lots or developing lots for the construction and sale primarily of single-family detached homes to first-time and first-time move-up homebuyers under the Richmond American Homes name. The company conducts its homebuilding operations in Arizona, California, Nevada, Washington, Oregon, Colorado, Utah, Virginia, Maryland, and Florida. Its financial services operations comprise originating mortgage loans primarily for homebuyers; providing insurance coverage primarily to its homebuilding subsidiaries and subcontractors for homes sold by its homebuilding subsidiaries, and for work performed in completed subdivisions; acting as a re-insurer on the claims; selling third-party personal property and casualty insurance products to homebuyers; and offering title agency services to homebuilding subsidiaries and its customers.

    Why is its PE so attractive? It’s because the homebuilding market is un fuego! The pandemic has caused a flight from the cities. People are leaving apartments because they need to work remotely from a home office. Otherwise they’d have to sit on the floor and work. They want a yard for their dog to run around in. This isn’t just an MDC phenomenon, it’s really helping all home builders who were positioned to take a whack at it. You should expect the housing market to benefit from record low rates, favorable demographics, and years of underproduction - particularly of affordably priced homes.? However, for now I like MDC the best.

    The company is:

    • Raising 2021 estimate on strong orders, backlog
    • with net orders increasing more than 56% for the year.
    • The dollar value of new orders rose by 92% to $1.3 billion in 4Q. The average order price was up 12% to $485,700. MDC's unit backlog rose 75% to 6,655 homes, with a value of $3.26 billion, at the end of 4Q. The increase in the dollar value was 87%.

    • Interest rates are low…and will be low for a long time.

    • ANAL-ysts have raised their 2021 estimate to $7.10 from $6.50 per share on higher homebuilding revenue. Even at a PE of only 11, that projects to a share price of over $77/share – well past my target price.

    Even as we see the economy rapidly improving, and there is not a shred of a doubt things will get better for the remainder of this year, MDC has already been benefiting from the uptick. On February 2, MDC reported a 4Q20 profit of $2.19 per share, up from $1.42 a year earlier and well higher than ANAL-ysts estimates of $1.17 per share. Pretax income came to $171 million, from $112 million in the prior-year quarter. Home sales revenue for the fourth quarter ended December 31, increased 10% from the prior-year quarter, to $1.18 billion. The company delivered 2,564 homes, which was a 7% increase from 4Q19. New unit orders were up 72% to 2,708 homes. The dollar value of new orders rose by 92% to $1.3 billion in 4Q. The average order price was up 12% to $485,700. MDC's unit backlog rose 75% to 6,655 homes, with a value of $3.26 billion, at the end of 4Q. The increase in the dollar value was 87%. The average backlog home price was up 7% to $490,300.

    The company delivered growth of more than 30% per year in 2016, 2017, and 2018. EPS increased 10% in 2019 and 50% in 2020. Just walk around your neighborhood….there is zero inventory of houses. The demand is scorching hot. There is no doubt that the pandemic has put a premium on having a nice safe place to live. Mortgage rates hit another record low this month for the fourteenth time this year. MDC remains favorably positioned to capitalize on this industry backdrop with its expanding geographic footprint and build-to-order operating model.

    And what of the stock? MDC is currently trading above its 50-day and 200-day moving averages of $57.55 and $51.57, respectively, indicating that the stock is in an uptrend. Also, the stock has gained 30% over the past three months, reflecting short-term bullishness. At the end of the day, you are looking at impressive financials, short- and long-term bullishness, and solid price momentum when you digest whether or not this stock is a good investment. In February, MDC forecast 2021 home deliveries between 10,000 to 11,000, a 3-year high. Revenue is also expected to be up double digits for the year at $5.2 billion, up 33.4%. The dividend is currently yielding 2.2%, one of the highest yields in the home building industry. In Mar 2021, the company also paid out an 8% special dividend, an indication that they see robust cash flows ahead.

    Overall, M.D.C. Holdings is a great business with a good CAGR of 10% projected growth as the United States economy grows going forward with the low interest rates. The great earnings, revenue growth, and increasing orders give MDC the capability to continue its growth and have enough cash to increase the dividend and expand the business. The Fed lowering interest rates and the increase in orders for new homes make this company a strong buy.

    Here’s what the boss had to say: Commenting on MDC's Q4 results in a news release, Chairman Larry Mizel said, "The dollar value of our net orders for the quarter increased 92% year-over-year on a 67% improvement in sales pace." Mizel added that the company continues to see "broad-based strength in demand from both a geographic and a product standpoint."

    Like they said in the movie Goodfellas – “The drinks are on the HOUSE”. I am betting the HOUSE on MDC. Can’t wait to cash at the pay window!

    I am HUGE!

    $$$MR. MARKET$$$
    Last edited by mrmarket; 04-19-2021 at 10:01 AM.
    =============================

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

    - $$$MR. MARKET$$$

  2. #2
    Join Date
    Sep 2003
    Posts
    4,908

    Default

    I agree with this pick! Why choose between a homebuilder and a bank, when you can have BOTH in one awesome stock? Plus, the 11.5 P/E ratio is very good, especially if its growth of 30% can continue. I'll be buying this one on Monday, no doubt!

  3. #3
    Join Date
    Sep 2003
    Posts
    4,908

    Default

    I'm in with you at 61.4! Can't wait to see it trading up at $70 in a few weeks!

  4. #4
    Join Date
    Jun 2009
    Location
    NJ
    Posts
    584

    Default

    Excellent write up HUGE one! MDC pulled back today on light volume and provided me a good opportunity to get on this train to Mr. Marketville, where only the finest meats & chesses are served.

  5. #5
    Join Date
    Jun 2009
    Location
    Earth (Mostly)
    Posts
    761

    Default

    MDC earnings call is tomorrow at 10:30am MST.

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