The short interest moves in residential construction stocks were mixed again during the early weeks of August, as concerns about rising interest rates began to grow.
M/I Homes (NYSE: TOL) saw upswings in short interest of more than 12 percent.
The number of shares sold short in Beazer Homes (NYSE: SPF) also increased from the previous period.
The short interest in Meritage Homes (NYSE: MTH) and TRI Pointe Homes (NYSE: TPH) was essentially flat between the July 31 and August 15 settlement dates.
However, Taylor Morrison Home (NYSE: TMHC) saw its shares sold short shrink more than 36 percent.
Short interest in Hovnanian Enterprises (NYSE: HOV), KB Home (NYSE: KBH), Lennar (NYSE: LEN), Lyon William Homes (NYSE: WLH), NVR (NYSE: NVR) and PulteGroup (NYSE: PHM) declined more modestly.
Below is a quick look at how M/I Homes, Taylor Morrison Home and Toll Brothers have fared and what analysts expect from them.
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The number of shares sold short in this builder of single-family homes grew about 17 percent to about 2.51 million, which was more than 10 percent of the total float. That was the highest level of short interest since mid-May. During the period, the days to cover rose from about five to more than seven.
This Columbus, Ohio-based company has a market capitalization of near $460 million. Analysts expect to see revenue growth of at least 25 percent in the current quarter and the next. Note that the company's long-term earnings per share (EPS) growth forecast is about 15 percent, but the return on equity is about eight percent.
All three analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares. They believe shares have plenty of headroom, as their mean price target represents almost 38 percent potential upside, relative to the current share price. That price target would be a multiyear high.
Shares are trading near a year-to-date low after the share price retreated almost 10 percent in the past month. It is still about three percent higher than a year ago, though. Over the past six months, M/I Homes has outperformed competitor NVR and the broader markets.
Taylor Morrison Home
Short interest in this home builder and land developer plunged more than 36 percent in the initial weeks of August to around 790,000. That was more than two percent of the float, and almost half the number of shares sold short in mid-July. The days to cover was about one again.
This Scottsdale, Arizona-based company reported better-than-expected second-quarter results during the period. The company has a market cap near $650 million. While its return on equity is about 44 percent, the long-term EPS growth forecast is only around five percent.
Nine of the 11 analysts surveyed recommend buying shares of Taylor Morrison Home. Their mean price target, or where analysts predict the share price will go, is more than 28 percent higher than the current share price. That price target would be a new high since the initial public offering (IPO) back in April.
Shares have pulled back about 10 percent in the past month and are now trading about 13 percent lower than at the IPO. The stock has underperformed competitors Lennar and PulteGroup since coming public, and it has underperformed the broader markets as well.
The number of shares sold short in this builder of homes in luxury residential communities gained about 13 percent to around 10.33 million, the highest level of short interest in almost a year. Note that the short interest was more than six percent of the float, and days to cover rose to less than three.
This Pennsylvania-based company has a market cap of more than $5 billion. The long-term EPS growth forecast for Toll Brothers is more than 54 percent. The return on equity is more than 15 percent. The price-to- earnings (P/E) ratio is less than those of peers Lennar and PulteGroup.
Out of 22 analysts surveyed, 13 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 almost 17 percent higher than the current share price. Yet that consensus target is lower than the 52-week high reached in May.
The share price is down more than three percent in the past month, as well as almost eight percent lower year-to-date. Over the past six months, Toll Brothers' stock has outperformed the likes of Lennar and PulteGroup, though it has underperformed the broader markets.
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At the time of this writing, the author had no position in the mentioned equities.
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