For his second "Executive Decision" segment of Mad Money Tuesday evening, Jim Cramer spoke with Stuart Miller, executive chairman of homebuilder Lennar Corp (LEN) , which saw its shares plunge 3.9% despite a better-than-expected quarter that included strong guidance for the rest of 2020.
Miller said there's no doubt that Covid-19 has changed the home market and has caused a recalibration of the industry. Consumers are looking for homes that meet today's needs, and that includes floor plans with room for home offices, home gyms and even home schools for their kids. All of those spaces are made possible by smart technology like WiFi throughout the home, without dead spots.
Lennar continues to focus on their strategy of driving gross margins and cash flow, Miller said. That's how they've been able to deleverage their balance sheet and reduce their debt by $2.8 billion so far.
When asked why the homebuilders aren't building a ton of new homes to meet surging demand, Miller said everyone learned their lessons in 2008, and both lenders and builders are proceeding with caution. He said Lennar will always take a measured approach to production and sales to ensure they never get ahead of themselves.
We looked at LEN just ahead of earnings on September 14 and wrote that "the charts and indicators of LEN look bullish ahead of earnings tonight. I have no special knowledge of the numbers but the charts and indicators suggest higher prices in the weeks ahead. Longs should risk a close below $70 now."
Prices are still nicely above our risk point so let's check the charts to see if any change in strategy is warranted.