In his first "Executive Decision" segment of Mad Money Friday evening, Jim Cramer spoke with Dave Flitman, president and CEO of Builders FirstSource (BLDR) , the building materials supplier.
Flitman said Builders FirstSource operates in 84 of the top 100 markets in the U.S., with the majority of their revenues stemming from single family home construction. Some 12% of sales comes from multifamily units, he said, and another 12% from the professional repair and remodeling markets.
When asked about the state of the housing market, Flitman explained that the U.S. had been under-building for years, but in 2020, the home builders began to pick up the pace. Then, as the pandemic hit and housing heated up even more, suppliers simply weren't ready to cope, especially once COVID shutdowns began. This has led to shortages and cost inflation across many categories from lumber to doors and windows, and beyond.
There are still opportunities to be had, however. Flitman said that Builders FirstSource is going digital, moving its 700 designers and engineers to all-digital workflows that could be a $1 billion opportunity for the company.
We looked at BLDR way back on August 18, 2020 and recommended that "BLDR might pull back further to $28 in the days ahead. Aggressive traders could use this potential weakness to go long if they risk a close below $26. The $47 area is our price objective."
Let's check some updated charts.
In this daily bar chart of BLDR, below, we cannot see the dip in late August 2020 and the subsequent rally to $47 by March of this year. Prices climbed to $54 in early May and then corrected lower to $40 in July. Another push upwards can be seen this month. Prices are trading above the rising 50-day moving average line as well as the slower-to-react 200-day moving average line.
The On-Balance-Volume (OBV) line shows a rise the past year with only temporary corrections. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line in bullish territory but has turned to the downside for a take profit sell signal.
In this weekly Japanese candlestick chart of BLDR, below, we see a bullish picture. Prices have rallied more than five-fold in the past three years. Prices are trading above the rising 40-week moving average line.
The weekly OBV line has been positive the past two years and we do not see any recent top reversal patterns. The MACD oscillator just crossed to the upside for a new outright buy signal.
In this daily Point and Figure chart of BLDR, below, we can see a potential price target in the $59 area.
In this weekly Point and Figure chart of BLDR, below, a $71 price target is being projected by the software.
Bottom line strategy: Traders could use any short-term price weakness to go long BLDR. Risk a close below $47. The $59 area and then the $71 area are our price targets for now.
