Home Builders Are Cyclical Companies But Are You Screening Them As Such?
SummaryHome builders are cyclical companies. As such they should be screened based on their performance over the Housing Starts cycle. But Housing Starts cycles differ in duration and peak-to-trough magnitude. One way to screen for such companies is to estimate the expected ROE and Margin of Safety. This takes into account the probabilities and values of the metrics over the pessimistic and optimistic cycles. Q2 2022 hedge fund letters, conferences and more At the same time, there is no long-term growth in the average annual Housing Starts. As such the Margin of Safety should be based on the E...