Friday, December 28, 2007

CBS Year End Review: Standard Pacific

Standard Pacific is down 84% since I initiated coverage on March 30, 2007. (Red S indicates blog posts where "sell" is reiterated.)

In my first SPF post, I talked about how the assets on the balance sheet were greatly overvalued, and would require significant further writedowns. I also brought up the issue of the two layers of financial leverage thanks to the joint-venture deals.

Also, this observation proved to be an understatement:

And when land values fall, they fall hard. They are a bet on home prices and builder profit margins.

I grant that the old JV land, and the old land owned (if any), are undervalued on the books. But my suspicion is that the amount of that land is dwarfed by the way overpriced land.
On October 3, I questioned the reasoning behind a huge homebuilder rally sparked by Citigroup analyst Stephen Kim. Sure enough, that was not the bottom for the homebuilders.

This is an industry suffering from huge over-investment, and it needs a restructuring.

I am still short Standard Pacific, and I believe that their common stockholders will be wiped out within one year from today.


Stair ClimbLunatic said...

Great blog! What do you think of FirstFed (FED)?

Didn't see anything on here about it, but they are very similar to DSL. The thing has defied gravity for most of 2007 and only finally started to tank in the last few months.....

Many of my previous puts evaporated, but my leaps are finally in the money.....

Anonymous said...

Hi Credit Bubble,
I think there are few commercial real estate (CRE) companies out there that will go down like DSL pretty soon. (Sector is down by 30% so far).. If you could please find one DSL from this CRE haystack.. ones borrowed beyond their means and made lavish purchases in heights of the bubble.. I am sure there are more than one(BXP, VNO, LXP .. etc ) such companies but ONE would do it to make money.

Personally I am short on ABK, MBI, HRB (this baby has a huge slope awaiting to slide, should be a good ride for us though..:)

Thanks for the site.. I am kicking for not coming across your site few months ago.


Anonymous said...

You may be right Yreless. CRE is next pack of cards about to fall.
I bet there is a TOA in commercial real estate market..Look at TOA, got evaporated into the thin air.
Who is TOA in CRE, please stand up !!

Credit Bubble, could you please find out.

CP said...

I don't follow FED. There are some who think FED's loans are not that bad.

I look for an industry that I think is going to under perform, and then look for the worst stock in that industry.

The only builder I am short right now is SPF. The only lenders are DSL and BKUNA. I am short MBI too.

I think DSL is going to surprise again with really bad NPAs for the month. I'll do a post about it before they release.

Take a look at these retail REITs:

Anonymous said...

You hit the bull in the eye with SPF, BKUNA and MBI.
Do you see any such losers in the Yahoo REIT list ?
We gotta be lil careful here, if any of them owns and operates rentals, apartments I think they might doing ok.

Thanks much and Happy New Year.

Anonymous said...

Any thoughts on when to cover for DSL and BKUNA?

A big portion of my portfolio is BKUNA shorted around 20 (now 6.7) and DSL shorted around 60 (now 31).

I also have some DSL May $25 puts, which have doubled from 2 to 4.

So I am getting a tad itchy to take my gains, but on the other hand I think both companies have not even felt the worst of their pain since most of their customers have not hit their resets yet.

Anonymous said...

I think ACAS will go down like DSL soon. Nothin happened to this stock yet as the dark side of its balance sheeet is just popping up.. grab somw short position if you can..

CP said...

I'm not covering SPF, DSL, or BKUNA yet.

Anonymous said...

...I believe that their common stockholders will be wiped out within one year from today.

How do you feel about SPF after the most recent earnings and statement by management? It has more than tripled in the last few weeks.

Great blog, BTW.