Short This Homebuilder Now
Michael Shulman, September 30, 2009
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Hovnanian Enterprises (HOV)
The homebuilders with the weakest balance sheets and a focus on high-end homes will struggle the most and could possibly even go bankrupt, so take a look at shorting Hovnanian Enterprises (HOV).
It doesn't take a genius to measure a balance sheet: long-term debt divided by net cash. And Hovnanian has nine times long-term debt to net cash (not kidding). Plus, the company has a focus on high-end homes in a recession -- not a good thing.
Right now, HOV is the best place to go short. And the best way to do that is with HOV put options with expirations three to six months out.
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