I also took a look at builder’s stocks a few weeks back and have to say that at least in the short term they have been driven down (30%+) since early this year so even if you believe they’ll keep going down over the next few years today may not be the best time to short as even dead cats bounce back somewhat. And as Chris J said, the stocks’ valuations aren’t really that excessive at the moment so there’s a chance that they could just range trade over the next few years.
I’m also looking at mortgage companies that depend heavily on mortgages. Companies like bay area based Golden West Financials (GDW) which Wachovia’s buying. GDW derives a high proportion of earnings from mortgage business and over 30% of those mortgages are ARMs. Unlike builder stocks that have been beaten down GDW’s still quite near its 52 week high. Any comments ?
