• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

This Looks Constructive

Amid the carnage Friday, several housing-related names held up well despite downbeat home-sales data.
By KATE STALTER Oct 20, 2012 | 02:30 PM EDT
Stocks quotes in this article: LL, BECN, NSM

It's often constructive to track stocks and industries that buck market downdrafts -- and, on Friday, there actually were a few pockets of strength amid the carnage. For example, several leading housing-related stocks closed above their 10-week averages Friday, despite data from the National Association of Realtors showing that September home sales fell 1.7%.

Shares of Lumber Liquidators (LL), which I currently hold in a growth portfolio, bounced off its 10-week average. The stock is currently holding between that key price line and its Sept. 14 high of $54.

In a market uptrend, this stock would be in buy range. However, there's something else to watch for: The flooring manufacturer is set to report its third quarter before the open Wednesday. Wall Street is eyeing income of $0.34 per share on revenue $189.54 million, which would constitute increases over the year-earlier quarter.

This stock has rallied in 2012 amid optimism about an improving housing market. Lumber Liquidators' market capitalization is $1.3 billion. It moves 557,000 shares per day, on average, and the stock's beta is 1.36, indicative of its propensity to volatility.

It's not atypical for small-cap names to be more volatile than the broader market. Another housing-related small-cap with a high beta is Beacon Roofing (BECN), whose beta is 1.47. This stock tends to exhibit a more wide-and-loose trading character than does Lumber Liquidators. Beacon rallied to an all-time intraday high of $31.75 Thursday and retreated along with the indices Friday, closing 2.3% lower at $30.19. It finished the session 6.3% above its 50-day line, perched at a healthy level.

The fundamentals on Beacon can also be erratic. Revenue growth slowed to 4% in the most recent quarter, its first drop into the single digits since the March 2011 quarter.

The company is due to report its fourth quarter in late November. For the year, Beacon is expected to earn $1.67 per share for a year-over-year gain of 44%. That's seen slowing in 2013, to $1.31 per share.

I've written about Beacon here before, and I've liked its prospects for the past several months. But, heading into 2013, when earnings are expected to decline, I'm less sanguine. The choppy trading character also gives me pause.

Another housing-related name that I have held in the past is Nationstar Mortgage (NSM). The non-bank residential mortgage originator has a few things in common with Lumber Liquidators and Beacon Roofing: All three have had fairly recent initial public offerings. Nationstar is the youngest of these, having made its trading debut in March of this year.

Nationstar is also a small-cap. The stock has been pulling back from its Oct. 3 session high of $37.20, and closed Friday at $32.58, 8.3% above its 50-day average.

Nationstar, which has been growing through acquisition, made a bid of $2.45 billion for the mortgage unit of Residential Capital.

According to reports, Ocwen Financial (OCN) and Walter Investment Management (WAC) joined forces in a competing bid that's $40 million higher than that of Nationstar.

Nationstar is expected to report its third quarter in mid-November. Analysts expect per-share earnings of $0.63 a share on revenue of $369.92 million. Those would mark huge improvements from a year ago, and would reflect both organic and acquired growth. In the year-ago quarter, the company reported a loss of $0.03 per share on revenue of $90.9 million.

The current consolidation could offer a new buy opportunity if the stock can maintain its position above key moving averages.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stalter had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity

More from Investing

Rotation Is No Reason to Turn Away from the Markets

James "Rev Shark" DePorre
Jan 21, 2021 4:45 PM EST

Bears may fuss over the routine consolidation combined with rotational action, but here's how I look at the moves.

Jim Cramer: Housing Is Our Bridge

Jim Cramer
Jan 21, 2021 3:59 PM EST

Do not fear the housing sales boom -- this is good news and I'll tell you why.

Cord-Cutting FuboTV and Advertising Platform PubMatic Are Not Buys Here

Bruce Kamich
Jan 21, 2021 2:59 PM EST

Our look at the stocks of both FUBO and PUBM.

Jim Cramer: You Just Won Powerball, Now What?

Jim Cramer
Jan 21, 2021 2:24 PM EST

Remember, you only need to get rich once.

Here's the Beast and Beauty of Investing in Disney Now

Bruce Kamich
Jan 21, 2021 1:54 PM EST

DIS might suffer a pullback in the next several weeks, but longer-term a rally is possible, according to the charts.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • 08:35 AM EST GARY BERMAN

    Thursday Morning Fibocall for 1/21/2021

    SPX (Long-Term View) The 1/20/21 NEW high @ 3859...
  • 11:38 AM EST CHRIS VERSACE

    Best Stocks to Buy for the Biden Presidency

    President-elect Biden's massive stimulus plan, int...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login