Tickers in this Article: BZH, TOL, LEN, HOV, KBH
Some members of the press are already arguing that the recession has passed and that Americans will start to spend their money again. I agree with that notion, but I do not agree that high-ticket items are likely to be on Americans' shopping list and I certainly don't think that homebuilders are going to have an overly upbeat year in 2010. With that in mind, today I would like to discuss Beazer Homes (NYSE:BZH).

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My Bone With the Builders
I've pointed it out in prior articles, but it bears repeating several times if necessary: Homebuilders have had a terrific run up as a whole. In fact, Beazer Homes is up 200% over the last 52 weeks, while Hovnanian (NYSE:HOV) is up more than 89% and Lennar (NYSE:LEN) is up more than 29% over the same period. On the flip side of the coin, Toll Brothers (NYSE:TOL) is down 8.46% over the last 52 weeks and KBHome (NYSE:KBH) is up just under 1%. Clearly, there are some good things happening in this sector.

But again, my point is that I think the enthusiasm is too much and I think it could take several years (at least) for big interest in new homes to materialize. A high inventory of for-sale homes, the risks of another dip in the economy and the potential for higher borrowing rates could all thwart a comeback. This leads me to my next point. The paltry earnings outlook.

As things stand now, Beazer is expected to lose $2.79 a share this year; KB Home is expected to lose $3.13 per share; Hovnanian is expected to lose $3.61 a share; Lennar is expected to lose $3.13 a share; and finally, Toll Brothers is expected to lose 72 cents this year. Put another way, in my mind there's a lot less to get excited about than one would expect from some of the stellar returns these companies have been posting lately. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)

Back to Beazer
I brought up Beazer because it was recently in the news because it had priced 19.5 million shares of stock at $4.60. For me, selling stock at around this level signifies what the company thinks may come ahead. In other words, if management and the board were super bullish, wouldn't they be putting this on the back burner? That's my thinking. Also, I would point out that the company's lackluster share price could be an issue too, as some analysts and investors are sometimes reluctant to delve into low priced stocks. I think that Beazer will have to keep itself at better than $5 if it wants to get attention here.

I've already mentioned the losses Beazer is expecting this year; it also expects to lose 70 cents next year. I don't think that this is too endearing either and if this market does tumble, I think that Beazer and the above-mentioned homebuilders may end up giving a good chunk of their gains back.

One thing that would interest me, or cause me to rethink my posture, is if insiders were to buy aggressively in the open market this year. I think that would send a very positive signal to Wall Street. Right now I'm watching and waiting to see what happens and what future data says on that front.

Bottom Line
I am not a bull on Beazer or the other homebuilders. In fact, I see a sizable amount of potential risk among these stocks. The macroeconomic environment is still soft and I would suggest that sooner or later the stock prices will better reflect this picture. With specific regard to Beazer, I see the pricing as a negative. I am also not thrilled with its lackluster share price.

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