Manufactured homes

[anxvariety]

I’ve decided on a group of stocks to take on as my largest long term investment.. manufactured housing companies.

I believe that this industry will grow against the grain of a housing decline.. people need to live somewhere, and these manufactured homes can give people a pretty good option.. the homes are nice, and are usually well insulated – allowing them to be placed in not so friendly(less expensive) climates.

My belief is that over the baby boomer retirement and housing slowdown years we see an incredible growth in the manufactured home business.

Warren Buffet has already been spotted buying out companies in this industry.. do a Google search if you’re interested.

The stock valuations in this industry are the lowest they’ve been, maybe ever as far as I can tel..

Two stocks I’m going to buying starting tomorrow are:
CHB
CAV

Interested in any input others have… just thought I’d share this and I’ll post back in a year with how they did!

[anxvariety]

I’ll post back in a year with.. how theyre DOING is what I meant to say.. that is if I’m still holding.

Don’t take this thread as a prophetic attempt, I’m just thinking maybe it could become interesting topic.

[an]

Those two you listed got killed recently. One lost 66% and the other lost around 75%. It might be a good time to start looking into them. Maybe after they drop a little more. I would say, wait till it get to a point like Lucent and Nortel were at when they’re in their $0.50-$0.75 range. Good bottom feeder stock that get oversold.

[anxvariety]

Thanks for the info asianautica.. My question to you is, at $3.00 CAV is at 4x earnings.. that’s pretty darned good if you feel that the company has alot of room to grow like I do… That would be like lucent being at 50cents.. I know P/E isn’t the holy grail.. but…

I guess you’re right though, should probably see if these are good bottoms.. these two probably aren’t going anywhere too fast… No sense in overpaying, especially when I can be using cash in the meantime in my more volatile favorites like energy and mortgage options…

[an]

I’m sure you already know this, but every industry have different metric for P/E and how much is expensive/cheap. So, that 4x might look cheap compare to other sector but in line with its peer. It would make more sense to compare it to its peer, here are some P/E i pull up from builders: KBH = 4.16, MTH = 3.64, TOL = 4.95, and the who builder industry average P/E is 4.25. So I would be very careful touching those two that you listed at the current point. I think prefab builder doesn’t have as big of a margin as the traditional builders, so they would have to sell much more to match the profit the traditional builders get.

[anxvariety]

I just checked out KBH KB Homes profit margin and it’s at 9%.. then I checked CHB Champion Enterprises and their profit margin is at 11% with 77% return on equity.. Cav’s is at 5%.

I think we’ll need a larger sample and more information to determine who is more profitable. I would think the larger company would have a better chance at having a vertical integration to protect profits, but I would think these prefab homes would have more profit in the price being that they are even more cookie-cutter in their philosophy than someone like KBH.

Cav’s book value is 5 cents less than the current share price!

[anxvariety]

so they would have to sell much more to match the profit the traditional builders get.

I’m not really looking at matching profit, I’m just looking for growth.. KBH’s market cap is 60+ times that of CAV.. so if CAV could have 1/10th the profit of KBH I’d be one happy camper!

[Anonymous]

I personally would be some what reluctant to buy into the manufactured housing sector. While it may make sense from an affordability issue and baby boomer play the biggest drawback is primarily this – financing.

Manufactured homes seem to be “tainted” with regard to traditional financing sources. They don’t appear to have a great track record and this could be a very big component of this industry’s future.

Make sure you do your homework before investing too heavily on the manufactured home sector.

[anxvariety]

Manufactured homes seem to be “tainted” with regard to traditional financing sources. They don’t appear to have a great track record and this could be a very big component of this industry’s future.

Let me try a quick rebuttal if that’s what it’s called..

Well from what I understand ‘used cars’ aren’t exactly the most exciting thing for banks to finance either.. but it still happens.. If banks are going to survive they’ll have to be loaning out money.. to buy what? How about a non-speculative inexpensive place that someone will be living/have an interest in keeping?

Or by ‘tainted’ did you mean that people think of manufactured homes as trailer parks? If so sure.. seems like everything over the last 10 years has been all about pushing people into more expensive purchases by making them feel insecure or afraid about something… I see this next cycle as being the distillation of ‘needs’ from ‘wants’.

[powayseller]

The housing market is slowing. Why would any sector of the housing market be a good buy, whether it is carpets, air conditioners, roofing tile, or manufactured homes?

Second, the biggest cost of a home is land. Why would anyone buy land now for their manufactured home? I think buyers are on the fence on buying land now.

Leasing space in a trailer park is expensive too. In Poway, we have several trailer parks. Yesterday, while at the dog park, I met a lady who is an accountant. She pays $750/month for her space. She paid $40K for her trailer, and thinks it is worth $80K now. I think it is a very high rent.

I would check out the realistic prospects for manufactured homes, not from some manufactured home sales rep, but from someone you trust to tell you the truth.

As asianautica said, each industry has its own PEs. Look at Chevron with a PE of only 6 or 8 (??). Oil is going up, but such a low PE. Car companies have low PEs too. Software companies have much higher PEs.

Buying any stock now, you are running against the crowd. In a declining market, you are betting that your stock is going to go against the crowd. It is like running into a stampede of cattle. Maybe you will emerge on the other side, but most likely, not.

I don’t see any reason to buy any stocks now, except a sure winner like an energy company that is undervalued. I would run far from anything housing related. That’s just me….

[an]

KBH might not be a good comparison, but MTH is. Just looking at the data, I would rather buy MTH than CHB.
MTH
Revenue (ttm): 3.56B
Qtrly Revenue Growth (yoy): 39.90%
Gross Profit (ttm): 706.99M
Profit/Rev = 19.86%
CHB
Revenue (ttm): 1.43B
Qtrly Revenue Growth (yoy): 16.90%
Gross Profit (ttm): 216.84M
Profit/Rev = 15.26%
MTH is a small but traditional builder. So that shows CHB is in the middle of the pack I think.

[anxvariety]

The ‘where are people going to live’ is a valid question.. if rents and home prices are up what do you do? Especially if you’re retired and you need to lower your costs..

I challenge people to come up with a better solution for the living needs of this demograph: *dont take my math too literally

60 year old couple with 500,000 in the bank.. no need to commute but would like to be close enough to see children, grandchildren say within 100-200 miles

Rent?
2 bedrooms are now renting at $1500.. can you soak that up? Over 20 years that’s around 400k..

Buy old cheap house?
Interested in doing maintenance on an older house.. what else can you afford? Where are you going to buy? Crappy weather.. I hope you’re well insulated!

Buy Manufactured home?
Spend 60k on a manufactured home.. buy 30k lot in Borrego Springs.. Spend 20k hooking up water, gas, electric.. guess what, you’re done! 110k… Add 50k for whatever else you want.. done at 160k.

Second, the biggest cost of a home is land. Why would anyone buy land now for their manufactured home? I think buyers are on the fence on buying land now.

Maybe in San Diego.. If you paid me enough I’d send you a list of at least 50 places where you can buy the land for less than most people spend on a vehicle.

As asianautica said, each industry has its own PEs. Look at Chevron with a PE of only 6 or 8 (??). Oil is going up, but such a low PE. Car companies have low PEs too. Software companies have much higher PEs.

Sorry but you can’t just say ‘oil is going up’ and have it work… Not that I absolutely disagree, but first nothign is 100% and second if you’re using it as a reason against be fair… What is more important for a person especially a retirees survival, gas or a place to live?

The reason I want to buy these stocks is that I see demand increasing.. just like you claimed that ‘oil is going up’ that gives you the vision to buy energy companies..

We’re not talking about beanie babies here, despite the housing market crashing people are going to need to live somwhere.

[powayseller]

Don’t retirees move in with their children, or to retirement communities, i.e. into one of those vacant condos or retirement homes? Maybe the AARP has some surveys on this. The poor ones get a trailer and rent a trailer park space. You might be on to something, but I would research it a little further. AARP or other demographic studies, or talking with the elderly.

[anxvariety]

http://finance.yahoo.com/q/bc?s=WGO&t=5y

Winnebago is doing just fine even with these gas prices! This tells me something!

[powayseller]

The American auto dealers are having high sales too, but due to heavy discounting. Winnebago’s quarterly revenue growth is -13%, and quarterly earnings growth is -25%. Their stock price will come down soon enough.
http://finance.yahoo.com/q/ks?s=WGO

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