So What Exactly Is The "Short Homebuilders" Thesis At This Point

[EgonKuhn]

You're absolutely right, and they have indeed grown incredibly fast. But with stagnant sales in 2025 compared to the previous year, I would have at least hoped for some free cash flow.

 

Perhaps I'm just too jaded in this industry, but I find it reassuring when management occasionally plans for a harvest period after years of sowing to build up a kind of war chest for the inevitable cyclical downturn.

 

I see a Lovett and a Zalupski as individual investors with significant stakes in DFH. Is there some special culture at work here with kind of "outsider" management/leadership?

[KJP]

19 hours ago, Spekulatius said:

Was looking at DFH as sort of a deep value play since it’s now at ~90% of tangible book. 

 

 

Is that right? I took a quick look and it appears that total common shareholders' equity is about $1.42 billion, but they have $377 million in goodwill.  (I'm taking these numbers from the balance sheet in 2025 AR.)  So, about $1 billion in tangible book against about 100 million diluted shares = ~$10/share in tangible book value vs current share price of about $14/share.

Edited March 23 by KJP

[handycap5]

16 hours ago, Spekulatius said:

DFH almost 4x their revenues since 2020 without much dilution.  Homebuilding is a business that does require capital to grow. To quadruple a business without increasing the sharecount is quite an accomplishment.

 

PHM has generated an 8 X return over the last decade. It was a lollapalooza of a lot of things, no one by itself, the entire combination required to generate such an extraordinary return:  

 

40% community growth (not much absorption growth)

80% increase in profit per unit (some mix up here helped by Del Webb, more product diversity than other builders)

Shares down by almost half

Modest 10% PE multiple expansion

 

I would comfortably wager that the share count is never going back up, nor is the market share going to be surrendered. And the new industry is probably 10-20% below normal today.