Show Entire Article
“Housing has stabilized,” Cramer said during Thursday’s Mad Money, “but that doesn’t mean the homebuilders have.”
Prices haven’t yet reached a level where these companies can make money, which is why he urged investors to sell Pulte Homes [ PHM 11.13 
+0.25 (+2.30%) ], “the most dangerous of the homebuilders,” Cramer said.
The first warning sign against owning this stock is Pulte’s balance sheet. The company finished the most recent quarter with $1.5 billion in cash, $1.98 billion less than the previous report, and was not in compliance with the tangible net worth covenant of $2 billion under its revolving credit line. Cramer also criticized Pulte for paying an extra $1.4 billion for Centex’s intangibles – its brand name, customer relationships, etc. – as part of its acquisition deal. That was nearly double the expected amount.
Pulte has a number of other problems as well. The company’s key demo – retired and semi-retired Americans – watched their retirement accounts disappear during last year’s crash. And the real estate decline has reduced the value of their homes, thereby making it virtually impossible to buy new properties from Pulte.
Page 1 of 2 | Next PageShow Entire Article
More Top Stories