Safe Havens Bid Higher as U.S. Nonfarm Payrolls Miss Drastically

The housing market is still in dire straits, no matter how pundits spin it, and we think homebuilders, mortgage companies, and housing retailers are in for more tough times. Homebuilders in particular have low earnings quality, because they must buy land in order to continue building, and as they develop, the land they buy in the future increases because of their own improvements. Here is the investment picture for these companies: Hovnanian Enterprises (

): Hovnanian is the U.S.'s 6th largest homebuilder, with about 14,500 builds per year, at an average price of $280,000. The company is dominant in New Jersey; however, that state is looking at 9.3% unemployment currently, which has stubbornly stayed high over the past 18 months. Reviews of the company's buildings are mixed. Several lawsuits over building defects have been a thorn in Honanian's side over the last several years. Here is one example. The company has received several awards, however, for construction quality and “green” initiatives, notedhere. Going back to 2009, the company faced some steep losses in the wake of the financial crisis. Global credit markets froze, and, as a consequence, buyers of HOV homes could not access credit. HOV suffered severely, with EPS losses as steep [...]

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