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Warren Buffet Calling The Bottom?

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http://investing.reuters.co.uk/news/articl...NIAN-SHARES.xml

Buffett rumors lift Hovnanian, home-builder shares
Fri Jul 13, 2007 5:07 PM BST
NEW YORK (
Reuters
) - Shares of Hovnanian Enterprises (HOV.N: Quote, Profile , Research) rose sharply on Friday as rumors swirled that Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile , Research) would buy an interest in the struggling home builder.
"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."

Warren's philosophy of investing is simple: buy from pessimists and sell to optimists. The builders must be very pessimistic? If the property market in the US has seen the worst (other than the frothy markets at least) could this mean that a recession has been avoided? IMO, no.

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http://investing.reuters.co.uk/news/articl...NIAN-SHARES.xml
Buffett rumors lift Hovnanian, home-builder shares
Fri Jul 13, 2007 5:07 PM BST
NEW YORK (
Reuters
) - Shares of Hovnanian Enterprises (HOV.N: Quote, Profile , Research) rose sharply on Friday as rumors swirled that Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile , Research) would buy an interest in the struggling home builder.
"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."

Warren's philosophy of investing is simple: buy from pessimists and sell to optimists. The builders must be very pessimistic? If the property market in the US has seen the worst (other than the frothy markets at least) could this mean that a recession has been avoided? IMO, no.

If he is buying then perhaps he doesn't see an end of the world property crash. Maybe time to buy a house ?

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If he is buying then perhaps he doesn't see an end of the world property crash. Maybe time to buy a house ?

Not so sure:

http://uk.us.biz.yahoo.com/bw/070713/20070...05290.html?.v=1

Press Release Source: Fitch Ratings

Fitch: U.S. Housing Decline Unabated, Teleconference Today 11AM ET
Friday July 13, 9:48 am ET
NEW YORK--(BUSINESS WIRE)--U.S. homebuilders have had
no respite from the severe housing contraction
, and prospects remain guarded at least in the short term, according to Fitch Ratings, which will be hosting a conference call this morning at 11 a.m. ET.

Unless the Sage is going to wait another few weeks and buy a builder for pennies in the dollar? IMO Great Crash 2 is still in its infancy.

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http://investing.reuters.co.uk/news/articl...NIAN-SHARES.xml
Buffett
rumors
lift Hovnanian, home-builder shares
Fri Jul 13, 2007 5:07 PM BST
NEW YORK (
Reuters
) - Shares of Hovnanian Enterprises (HOV.N: Quote, Profile , Research)
rose sharply
on Friday as
rumors swirled
that Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile , Research) would buy an interest in the struggling home builder.
"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."

Warren's philosophy of investing is simple: buy from pessimists and sell to optimists. The builders must be very pessimistic? If the property market in the US has seen the worst (other than the frothy markets at least) could this mean that a recession has been avoided? IMO, no.

Could someone make a coin or two on just rumours

Edited by Broken Fan

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Not so sure:

http://uk.us.biz.yahoo.com/bw/070713/20070...05290.html?.v=1

Press Release Source: Fitch Ratings

Fitch: U.S. Housing Decline Unabated, Teleconference Today 11AM ET
Friday July 13, 9:48 am ET
NEW YORK--(BUSINESS WIRE)--U.S. homebuilders have had
no respite from the severe housing contraction
, and prospects remain guarded at least in the short term, according to Fitch Ratings, which will be hosting a conference call this morning at 11 a.m. ET.

Unless the Sage is going to wait another few weeks and buy a builder for pennies in the dollar? IMO Great Crash 2 is still in its infancy.

If it were his intention it would be unwise for him to telegraph this fact in advance. Perhaps it's someone else trying to ramp the price up so they can off load ? Well let's hope so anyway.

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"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."

I don't agree on this conclusion. Due to debt on a company's books, the performance of the shares can be leveraged or amplified relative to the performance of the company's product. So for example, a decline of a modest -10% in the housing market may cause a housebuilder's shares to decline by much more, say -30%. This does not mean however that it is the end of the decline for house prices. It seems that Hovnanian are a famiily run business, just the type of business that Buffett likes to buy. So this may be a factor as well

Best,

L

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Could someone make a coin or two on just rumours

I remember one week when my stock options went up $250,000 on a rumor that some big company was going to buy us out; sadly they hadn't vested by that point :).

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Perhaps the builders strategy has changed. Build more properties and get them sold quicker and make a profit. Rather than charge extortionate prices and sell none.

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I think to many think the housing market bursting in the US is the end of the world. It's these sentiments that are the reason of buffets fortune. He was buying silver when the price were 3 USD.

I don't think buffet look at macro factors at all. He just buy good companies, when he can get a discount off what's already what's the company are worth by his own calculation. They have probably been having home builder stocks under the loop for some time, finding good companies, waiting for the price to get right. If he is buying now, and the stock falls further some time ahead, I think he will buy more. If you look at that stock, the price are extremely low, compared to stocks in healthy sectors. The price are at the early 2002 level, while most other stocks are priced at 2-3 times their 2002 level on average.

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http://investing.reuters.co.uk/news/articl...NIAN-SHARES.xml
Buffett rumors lift Hovnanian, home-builder shares
Fri Jul 13, 2007 5:07 PM BST
NEW YORK (
Reuters
) - Shares of Hovnanian Enterprises (HOV.N: Quote, Profile , Research) rose sharply on Friday as rumors swirled that Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile , Research) would buy an interest in the struggling home builder.
"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."

Hmm lets see. You have a lot of builder stock. You wish to offload. Best way of unloading - spread rumour about Buffet/Bill Gates/Roman Abramovich/God buying stock. Sell your stock to the unfortunate punters sucked in by this rubbish rumour. Champagne all round. FFS Guys Get real !

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Hmm lets see. You have a lot of builder stock. You wish to offload. Best way of unloading - spread rumour about Buffet/Bill Gates/Roman Abramovich/God buying stock. Sell your stock to the unfortunate punters sucked in by this rubbish rumour. Champagne all round. FFS Guys Get real !

Lets start our own rumour, I hear Buffet and Billy Bob are buying up new build flats in Nottingham and Birmingham, :lol::lol::lol:

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http://investing.reuters.co.uk/news/articl...NIAN-SHARES.xml
Buffett rumors lift Hovnanian, home-builder shares
Fri Jul 13, 2007 5:07 PM BST
NEW YORK (
Reuters
) - Shares of Hovnanian Enterprises (HOV.N: Quote, Profile , Research) rose sharply on Friday as rumors swirled that Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile , Research) would buy an interest in the struggling home builder.
"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."

Warren's philosophy of investing is simple: buy from pessimists and sell to optimists. The builders must be very pessimistic? If the property market in the US has seen the worst (other than the frothy markets at least) could this mean that a recession has been avoided? IMO, no.

RB the bull - hoorah!!

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I think to many think the housing market bursting in the US is the end of the world. It's these sentiments that are the reason of buffets fortune. He was buying silver when the price were 3 USD.

I don't think buffet look at macro factors at all. He just buy good companies, when he can get a discount off what's already what's the company are worth by his own calculation. They have probably been having home builder stocks under the loop for some time, finding good companies, waiting for the price to get right. If he is buying now, and the stock falls further some time ahead, I think he will buy more. If you look at that stock, the price are extremely low, compared to stocks in healthy sectors. The price are at the early 2002 level, while most other stocks are priced at 2-3 times their 2002 level on average.

Well-reasoned post and quite possibly true.

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wasnt he the same guy last year that said the housing market was on the up?

No. Warren downloaded his Real Estate business in 2005 (Home Savings & Loan) and his California mansion in Laguna Nigel. He said at that time that housing was likely to see a correction at some point. 6 months or so later and it corrected.

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If he is buying now, and the stock falls further some time ahead, I think he will buy more.

This is known as "averaging down". I doubt whether Warren Buffett accumulated his vast wealth by buying more of something he has already lost money on.

This is a rookie investors error, not one Buffett would make.

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This is known as "averaging down". I doubt whether Warren Buffett accumulated his vast wealth by buying more of something he has already lost money on.

This is a rookie investors error, not one Buffett would make.

You are wrong. If you bought a dollar for 40 cent, would you loose money if it fell to 30 cent? No, could you buy some more? Yes

Edited by carseller

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You are wrong. If you bought a dollar for 40 cent, would you loose money if it fell to 30 cent? No, could you buy some more? Yes

And then when it drops to 20 cents you lose even more money.

Buying more after a price drop makes sense when the long-term trend and fundamentals are good, but buying more simply because you overpaid in the first place and prices are dropping is a bad plan... if the fundamentals are poor it can always go lower.

Right now I can't see why Buffet would buy into housing stocks; even at 2002 prices they're probably substantially overvalued with plenty of room left to fall. In another couple of years, perhaps it will make sense.

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And then when it drops to 20 cents you lose even more money.

Buying more after a price drop makes sense when the long-term trend and fundamentals are good, but buying more simply because you overpaid in the first place and prices are dropping is a bad plan... if the fundamentals are poor it can always go lower.

Right now I can't see why Buffet would buy into housing stocks; even at 2002 prices they're probably substantially overvalued with plenty of room left to fall. In another couple of years, perhaps it will make sense.

I don't know what he is buying, nor am I saying that he is buying that stock. But you cannot compare 2002 prices like that because of all the inflation in between. The Dow in nowhere near it's 2000 level, even if it setting new records. I was just trying to explain how he buys stocks, because most people do not understand him. He don't do it when everything looks good, he do it when the sentiment are bad or even terrible, or the sector are forgotten or when other things are hot and the stocks become out of fashion. If stocks become even more under priced, to him thats a good reason to buy more, not to sell. When he bought the Washington Post, he bought it at only 20% of the wretch value (a dollar for 20 cent), if the stock price had fallen after he bought it why should he care. I am sure most investors would not even care to find out what the wretch value were, because they only looked at the price or sector going down.

I mean, if you liked it at 20, you should love it at 10. That's how a rational person like buffet would think.

Edited by carseller

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He don't do it when everything looks good, he do it when the sentiment are bad or even terrible, or the sector are forgotten or when other things are hot and the stocks become out of fashion.

No. He buys when the stocks are out of fashion _and the fundamentals are good_. That's the part you appear to be missing.

I mean, if you liked it at 20, you should love it at 10. That's how a rational person like buffet would think.

Lots of people liked Enron at $20, and any of them who bought more at $10 saw it become a lot cheaper.

There's nothing rational about buying more of something just because the price drops. As someone else pointed out, it's a rookie mistake that will lose you a lot of money if the fundamentals for the market are bad.

Edited by MarkG

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No. He buys when the stocks are out of fashion _and the fundamentals are good_. That's the part you appear to be missing.

Lots of people liked Enron at $20, and any of them who bought more at $10 saw it become a lot cheaper.

There's nothing rational about buying more of something just because the price drops. As someone else pointed out, it's a rookie mistake that will lose you a lot of money if the fundamentals for the market are bad.

No, there is nothing rational about buying a bubble company with a high price compared to it's value, just because it falls from 100 to 50, if the true value really is 15. But then again it's nothing rational about buying a bubble company at 100 because the price goes up (unless you are a speculator that knows what you are doing), and the sector are hot. It's this mistake that most people do. Then when things turn, and they loose, they hope the stock goes back up, so they get even, instead it falls further, the loss become to painful, and they sell to people like buffet.

But if you have a company that's already cheap (10) compared to it's value 15, and it's getting cheaper, let's say 5, that's a perfectly good chance to buy.

Edited by carseller

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But if you have a company that's already cheap (10) compared to it's value 15, and it's getting cheaper, let's say 5, that's a perfectly good chance to buy.

No it's not. You're much better off to wait for the bottom and buy when it starts going up again.

If you buy 10 and it's still dropping, you instantly lose money. Even if you miss the bottom at 5 and buy at 10 when it's rising, you instantly gain money. Isn't Buffet's first rule of investing something like 'don't lose money'?

Edited by MarkG

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No it's not. You're much better off to wait for the bottom and buy when it starts going up again.

If you buy 10 and it's still dropping, you instantly lose money. Even if you miss the bottom at 5 and buy at 10 when it's rising, you instantly gain money. Isn't Buffet's first rule of investing something like 'don't lose money'?

You don't loose money if you were smart enough bought a London condo at 20K (and you think it's worth 100K in terms of future rental income), even if the price drops to 10K as long as you hold it. But if you were stupid enough to sell at 10K after you bought at 100K you just lost 90%!

I think in buffet terms, you lost money the moment you bought something for more than it's value, or sold it for less.

Edited by carseller

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