27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
In a report published Tuesday, Morgan Stanley analyst Haendel E. St. Juste said that the housing market seems to be on an upswing, heading into the summer. Both KB Home (NYSE: KBH) Lennar Corporation (NYSE: LEN) reported EPS beats and recorded pricing power “which should support continued margin improvements in 2H15.”
In the report Morgan Stanley noted that a number of positive metrics from both builders indicate robust housing demand. These include:
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- Order growth ahead of expectations: While KB Home reported 33 percent order growth, Lennar recorded 17 percent.
- Increase in absorption pace: All the builders in Morgan Stanley’s coverage have experienced absorption growth year-to-date.
- Pricing power: Both KB Home and Lennar indicated pricing power.
KB Home raised its FY15 revenue guidance from $2.8-$3.1B to $2.95-$3.1B, while also upping its margin guidance for 4Q15 from 17-18 percent to more than 18 percent. Lennar raised its FY15 deliveries guidance from 23.5K-24K to 24-24.5K, while maintaining its gross margin target at 24 percent.
Analyst Haendel Juste maintained an Underweight rating on KB Home, while raising the price target from $14 to $15. The EPS estimates for FY15 and FY16 have been raised from $0.86 to $0.90 and from $1.17 to $1.24, respectively, mostly to reflect higher gross margin assumptions.
Morgan Stanley said the Underweight rating was due to:
- The company’s high leverage and low margins relative to peers
- Expected flat community count in FY16 could limit volume growth
- Management's margin goals appear unachievable in the near term
Juste maintained an Overweight rating on Lennar, while raising the price target from $54 to $55. The EPS estimates for FY15 and FY16 have been raised from $3.23 to $3.27 and from $3.73 to $3.82, respectively.
“LEN continues to earn its high multiplethrough its strong operating platform which generated the deliveries and SG&A beats, mid-teens order growth on positive absorption,and outperforming ancillary business lines,” the report added.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.