Editor’s note: Four new companies have been added to the Inman Index this month. First American Financial, Fidelity National Financial, D.R. Horton and Toll Brothers were selected both to diversify the index to include more aspects of real estate and narrow the index to companies that focus primarily on real estate.
Investors took a new look at real estate stocks in April and liked some of what they saw. Six of the 10 companies that comprise the hypothetical Inman Index gained ground; one company was virtually unchanged, and only two closed in negative territory. Whether the one-month gains were a sign of renewed long-term optimism or merely short-term reversal of what may have been an overzealous correction in response to negative housing market news remains to be seen.
April’s top performer was Countrywide Financial, which posted a one-month gain of 12 percent, or almost $4 per share. Among the reports that touted the mortgage banking company as an investment were: “April’s Most Attractive Stocks” by Forbes.com; “Countrywide Financial Breaking Out? Maybe” by BloggingStocks.com; and “Subprime Fallout: Good for Countrywide, Bad for Choicepoint, Bankrate” by SeekingAlpha. Analysts at Credit Suisse reiterated an “outperform” rating with a target price cut from $52 to $50, according to NewRatings.com.
Yet Countrywide’s share price dipped at month-end after the company reported steep drops in first-quarter 2007 revenues and profits compared with the prior-year period and reduced its earnings outlook for the rest of this year.
IndyMac reported a 27 percent increase in first-quarter loan production and tightened its lending standards to make fewer loans to borrowers who have poor credit or can’t fully document their income or assets. The company also reported a decline in first-quarter earnings, which was attributed to continued erosion in mortgage banking revenue — a trend that management anticipated would continue for the second quarter.
An analyst at Banc of America Securities reportedly suggested IndyMac’s efforts to assure investors of the company’s limited exposure to subprime loans hadn’t been very convincing. An analyst at Lehman Brothers maintained an “overweight” rating on IndyMac with a target price of $45, according to NewRatings.com, and a third analyst upgraded the company from “strong sell” to “sell” with a $26 target price.
IndyMac’s NYSE ticker symbol will change May 1 from “NDE” to “IMB.”
In the April plus column behind Countrywide and Freddie Mac was home builder Toll Brothers, which gained 8.7 percent, or $2.38 per share, though analysts remained “cautious” about home builders as a group, according to a mid-April MarketWatch story.
Chairman and CEO Robert Toll reportedly commented at a recent conference on the fact that current housing market weakness hasn’t been accompanied by a recession, which, if it occurred at this time, “would be cataclysmic for the housing industry.”
A shareholder lawsuit against Toll Brothers has alleged that the company made material misstatements about its prospects as the housing markets waned. Attorneys are seeking class-action status for investors who purchased Toll Brothers common stock between Dec. 9, 2004, and Nov. 8, 2005. A company spokesperson told Reuters the allegations were “without merit.”
On the top of April’s minus column was Move Inc., which suffered a drop of more than 16 percent, or 92 cents per share.
The company, which operates the Realtor.com Web site, announced several product enhancements: A new remodeling “tool” helps homeowners “plan and visualize a remodel” by using pictures from home-product manufacturers; a “featured” Web site service for realty agents incorporates listings, community information, map-based comparisons of recently sold homes, an open-house calendar and an agent’s blog; a “green home” section features information about “green” building, and a joint marketing initiative with a trade association of moving companies created a feature that directs consumers to the association’s members.
The Inman Index overall gained 4.2 percent in April but has given up more than 7 percent so far this year. The recent one-month performance lagged the Dow Jones Industrials, which gained 5.7 percent, and tracked the Standard and Poor’s 500 and Nasdaq Composite indices, which gained 4.3 percent and 4.1 percent, respectively.
Marcie Geffner is a real estate reporter in Los Angeles.
Copyright 2007 Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.