Market Overview

Taylor Morrison, TRI Pointe See Big Short Interest Swings (TMHC, TOL, TPH)

The short interest moves in residential construction stocks were mixed again during the early weeks of July, as the recovery in the housing market continued to sputter along.

Taylor Morrison Home (NYSE: TMHC), Toll Brothers (NYSE: TOL) and TRI Pointe Homes (NYSE: TPH) saw the sharpest upswings in short interest.

The number of shares sold short in KB Home (NYSE: KBH), MDC Holdings (NYSE: MDC), NVR (NYSE: NVR) and PulteGroup (NYSE: PHM) also increased somewhat between the June 28 and July 15 settlement dates.

The short interest in Hovnanian Enterprises (NYSE: HOV) and Ryland Group (NYSE: RYL) was essentially flat, compared to the previous period.

But Beazer Homes (NYSE: BZH), D.R. Horton (NYSE: DHI), Lennar (NYSE: LEN), Meritage Homes (NYSE: MTH), M/I Homes (NYSE: MHO) and Standard Pacific (NYSE: SPF) saw their shares sold short decline somewhat during that period.

Furthermore, short sellers moved back into home improvement superstore operatorLowe's Companies (NYSE: LOW), up more than 13 percent from the previous period, and more modestly into Home Depot (NYSE: HD).

Below is a quick look at how Taylor Morrison Home, Toll Brothers and TRI Pointe Homes have fared and what analysts expect from them.

See also: Short Sellers Continue to Pile on KLA-Tencor

Taylor Morrison Home

Short interest in this home builder and land developer surged again in early July, more than 54 percent, to around 1.5 million shares, after jumping about 77 percent in the previous period. The mid-July number represented more than four percent of the total float, and days to cover rose to three.

This Scottsdale, Arizona-based company came public in April, and it is expected to post a net loss for the current quarter. The company has a market capitalization near $780 million. Its P/E ratio is higher than the industry average. But its operating margin is higher than those of competitors D.R. Horton and PulteGroup.

Eight of the 10 analysts surveyed by Thomson/First Call recommend buying shares of Taylor Morrison Home. They believe shares have plenty of headroom, as their mean price target represents more than 19 percent potential upside, relative to the current share price. That price target would be a post-IPO high.

Shares have traded mostly between $24 and $25 for the past six weeks, and the share price is only about five percent higher than the IPO. The stock has outperformed peers Lennar and PulteGroup since it went public, but it has underperformed the S&P 500.

See also: Short Sellers Pile on to Taylor Morrison Home

Toll Brothers

The number of shares sold short in this builder of homes in luxury residential communities gained more than eight percent to around 9.85 million, the highest level of short interest so far this year. Note that the short interest was more than six percent of the float, and days to cover rose to more than two.

This Pennsylvania-based company has a market cap of more than $5 billion and it does not offer a dividend. Note that Toll Brothers earnings were at least double the consensus EPS estimates in three of the past four quarters. And its long-term EPS growth forecast is more than 62 percent.

Out of 22 analysts surveyed, 13 recommend buying shares, four of them rating the stock at Strong Buy. The analysts believe that shares have some room to run, as the mean price target is about 20 percent higher than the current share price. Yet that consensus target is lower than the 52-week high reached in May.

The share price is up only about one percent in the past month, but more than 10 percent higher than a year ago. Over the past six months, Toll Brothers' stock has underperformed the likes of Lennar and PulteGroup, though it has underperformed the broader markets.

TRI Pointe Homes

Short interest in this Irvine, California-based builder of single-family homes rose about 25 percent during the period to more than 2.46 million shares, or to more than 15 percent of the total float. The number of shares sold short has increased in each of the past four reporting periods. Days to cover jumped to more than 16.

TRI Pointe Homes is expected to post modest EPS and revenue for the most recent quarter, but strong results for the full year. The company has a market cap near $480 million. Note that its P/E ratio is higher than the industry average.

The consensus recommendation of the four analysts polled is to buy shares of TRI Pointe Homes, and it has been for three months. Their mean price target represents more than 31 percent potential upside, relative to the current share price. That price target would be a post-IPO high.

The share price has pulled back about eight percent this week and is now down more than 15 percent since it went public. The stock has underperformed the broader markets since its IPO at the end of January.

Posted-In: Beazer Homes D.R. Horton hovnanian enterprises K.B. Home lennar M/I HomesShort Ideas Trading Ideas Best of Benzinga

 

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