Thursday, May 17, 2007

Anxiety On The Home Front

WASHINGTON, D.C. - The housing industry slump has Wall Street flummoxed.

“There's still a lot of uncertainty among us as to when the recovery will come,” says Daniel Oppenheim, who covers the home building business for Banc of America Securities. Indeed, analyst profit estimates in Oppenheim's industry are all over the place.

Yet in uncertainty lies the chance to make money, especially if you listen to the right experts. For that, we turned to our partners at San Francisco analytical research company StarMine and our recent tabulation of the best security analysts.

StarMine gives out separate awards for picking stocks and for estimating earnings. The rap on the most accurate earnings estimators is that they tend to be Excel jockeys, more adept at spreadsheets than market-timing heroics. This label fits Daniel Oppenheim, 32, who ranks as the third best earnings forecaster in his category, household durables, according to StarMine.

Oppenheim’s secret? Each month, he and colleagues survey 4,000 real estate agents across the U.S. The topics: what kind of foot traffic those agents see, the price movement of listed properties, incentives offered by home builders, overall inventory of homes on the market and the amount of time needed to close deals. The numbers give Oppenheim a sense of pricing--the key to home builder profitability--in the 40 biggest markets for new home construction.

Broadly, the data these days tell Oppenheim that home prices have further to drop. “We still have excess inventory relative to demand,” he says. That, combined with recent upheaval in the mortgage business, has Oppenheim cautious. He’s got “hold” ratings on all but two of the stocks he covers.

The only two stocks on his buy list are Standard Pacific and Hovnanian Enterprises. In their past two reported quarters, both builders of single-family homes lost money. But Oppenheim feels both have proven themselves the most realistic in writing down the value of their landholdings. As such, their book value, or the difference between assets and liabilities, more accurately reflects market conditions that of other companies.

Full story at