BZH will go UP
$20.00 on 7/09/08
$4.72 (6.07% from time of market call)
Although the initial numbers look bad for BZH, a quick run-through of the country's top housing developers shows an overwhelming downward trend. This is mostly due to a number of factors that will not last forever. The housing market will inevitably look up in the next few years which means that companies such as BZH are an excellent opportunity for a long term investment.
The housing market is an inelastic market. This means that it can not be done without in today's society unless we all decide to take up residence in cardboard boxes. Therefore, there is no conceivable way that such a company as BZH will go out of business. In 2007, it was rated in the top 10 largest producers of homes in the United States and therefore has a large and strong hold upon the market. Investing in BZH right now is a rock bottom bargain and can only yield big returns within the next few years.
There are a number of positive external factors that should be considered when looking at BZH. Firstly, the age distribution currently in the US shows a bulge of people similar to the baby boom currently in the teen years. Once this bulge reaches their 20s, they will be in the market for their first home. Right now there is a shortage of people in this age range and therefore in the market for a house which is also indicated by the age distribution chart.
A great challenge when buying a home is obviously the initial cost, especially in states such as California. This too has contributed to the slump in the housing market. However, with the current recession looming ahead, the government will be inclined to once again lower their interest rates on loans which will make it much easier to purchase something as pricy as a home.
BZH is a company that has established itself well in the housing industry. The industry is currently experiencing a slow down and has been for some time now. However, this slump can not possibly last forever and this means that companies such as BZH and Home Depot will soon be on the rise in the coming years. If you are looking for a short term investment, this is not the company for you. However, BZH presents an undeniably large return as a long term investment. My advice would be to watch for when the stock hits around $4 and buy as much as you can.
"Therefore, there is no conceivable way that such a company as
BZH will go out of business"
If BZH was the only housing company than I'd agree to some
extent. They don't hold a monopoly on the market and are
subject to being beat by their competitors.
Moreover, you are correct in stating that in the long term, BZH
has a great opportunity to rebuilding its company once the housing
market resurrects itself. Now, we don't know the time it will
take for the housing market to stop its downward spiral and move
back up, but I think you're ignoring that fact that if BZH
doesn't have the funds to last through the downward trend it
wouldn't be a surprise to see that company declare bankruptcy
(or at least liquidate its supplies.I don't pay much attention
to BZH but SPF has liquidated its Arizona business in order to
survive the housing market.) In no way is there a guarantee that
either company will last through the end of the housing crisis.
Btw, I want to understand what you mean by "housing market is
an inelastic market. This means that it can not be done without in
today's society" What does inelastic mean to you in this
case?
I like your review, and definitely think it merits more than the
paltry one star that the other person gave you (and failed to
explain the single star...)!
How do you reconcile the rise in gas prices, and the tendency that
will probably arise as a result: people will downsize their homes
and move closer to the city. Wouldn't downsizing, buying less
expensive homes, and moving closer to the city into older homes
lead to a long-term slump in the market even in demographics show
an oncoming boom in 20-somethings?
Assuming the US population is growing at 2% per year (which it most
certainly is not! See e.g.
http://en.wikipedia.org how can the growth seen in previous
years be resumed? Even if everyone in the US owns a home the
ultimate growth rate for this industry will match, or be slightly
lower than, population growth. Will all the other homes built in
recent decades be torn down? Will city centres empty out despite
increasing fuel and food prices?
I think a careful analysis of other economic factors could color
your analysis and lead to a somewhat less rosy view (though I think
you're probably right to some extent).
brzorro
