Furniture stocks such as La-Z-Boy and Ethan Allen are down big from their highs on the year even as homebuilder shares and other indicators point towards a housing recovery .
The divergence either means the recovery isn’t quite for real or that the comeback is being driven by speculative buying of empty foreclosed homes.
“I think the Street is so convinced of a housing bottom that shares of builders have gotten far ahead of many relevant suppliers,” said Steve Cortes of Veracruz Research, who pointed out this divergence in a note to clients.
The iShares Dow Jones Home Construction Fund , made up largely of homebuilders, is off only 5 percent from its high for the year and is up 30 percent for 2012. Meanwhile, shares of Ethan Allen are off 31 percent from their 2012 high and down 17 percent on the year.
Furniture makers got hit hard Wednesday after La-Z-Boy posted weaker than expected results for the quarter and said it was positioned to further “capitalize on any strengthening in the economy, particularly consumer confidence and the housing market.” Though the company failed to acknowledge that was underway.
Yet data from the Commerce Department Wednesday showed that permits for new construction hit their highest level in four years. This was the latest in a series of government data pointing to a housing bottom.Page 1 of 3 | Next Page