Market Overview

Short Sellers Pile on to Taylor Morrison Home (SPF, TMHC, TOL)

Short Sellers Pile on to Taylor Morrison Home SPF, TMHC, TOL

The short interest moves in residential construction stocks were mixed again during the final two weeks of June, as the recovery in the housing market continued to sputter along. Standard Pacific (NYSE: SPF), Taylor Morrison Home (NYSE: TMHC) and Toll Brothers (NYSE: TOL) saw the sharpest swings in short interest.

The number of shares sold short in D.R. Horton (NYSE: DHI), Lennar (NYSE: LEN), M/I Homes (NYSE: MHO) and TRI Pointe Homes (NYSE: TPH) increased somewhat between the June 14 and June 28 settlement dates.

The short interest in Beazer Homes (NYSE: BZH) was essentially flat, compared to the previous period.

But Hovnanian Enterprises (NYSE: HOV), KB Home (NYSE: KBH), MDC Holdings (NYSE: MDC), Meritage Homes (NYSE: MTH), NVR (NYSE: NVR), PulteGroup (NYSE: PHM) and Ryland Group (NYSE: RYL) saw their shares sold short decrease somewhat during that period.

Furthermore, short sellers retreated from home improvement superstore operators Home Depot (NYSE: HD) and Lowe's Companies (NYSE: LOW) during the period.

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

Standard Pacific

Shares sold short in this residential home builder decreased more than nine percent to about 34.44 million. That was the smallest number of shares sold short so far this year, but it represented more than 39 percent of the float. Days to cover fell from near six in the previous period to about four.

This Irvine, California-based company has a market capitalization of almost $2 billion. It acquired homebuilding assets from Centerline Homes in mid-June. The company's price-to-earnings (P/E) ratio is much less than the industry average, and the return on equity is more than 32 percent.

The consensus recommendation of the 14 analysts polled by Thomson Reuters is to buy shares, with six of them rating the stock at Strong Buy. The mean price target, or where the analysts expect the share price to go, is more than 13 percent higher than the current share price. That would be a new multiyear high.

The share price is about 11 percent lower than the 52-week high set in May, and it is now more than 14 percent higher than six months ago. In that time, this stock has outperformed competitors D.R. Horton, Lennar and PulteGroup, but its performance had been in line with the broader markets.

Taylor Morrison Home

Short interest in this home builder and land developer surged about 77 percent, to more than 991,000 shares, by the end of June. That was the greatest number of shares sold short since the IPO earlier this year, and it represented about three percent of the total float.

This Scottsdale, Arizona-based company came public in April, and it added a corporate finance expert to its board in June. The company has a market cap near $850 million. Its P/E ratio is much higher than the industry average. Its operating margin is also higher than the industry average.

All but one of the nine analysts surveyed recommend buying shares of Taylor Morrison Home. They believe shares have some headroom, as their mean price target represents almost 12 percent potential upside, relative to the current share price. That price target would be a post-IPO high.

The share price is more than 12 percent higher since the initial public offering. Shares have traded mostly between $24.50 and $26.50 since early May. The stock has outperformed peers Lennar and PulteGroup, as well as the S&P 500, since it went public.

Toll Brothers

The number of shares sold short in this builder of homes in luxury residential communities gained about 14 percent to around 7.94 million, largely erasing a 16 percent decline in the previous period. Note that the short interest was about six percent of the float, and days to cover was a little more than one.

This Pennsylvania-based company has a market cap of less than $6 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, 12 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 more than 11 percent higher than the current share price. Yet that consensus target is lower than the 52-week reached in May.

The share price is more than six percent lower than that high in May, though shares have risen more than four percent in the past month. Over the past six months, Toll Brothers' stock has underperformed competitors D.R. Horton and PulteGroup, as well as the broader markets.

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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