Hi AH, Re: Homebuilders ETF...................
About 3 weeks ago 11 of the 41 "Worst Performers" for the last 13 weeks were related to home building, furnishing, etc. Historically when we get that type of concentration in the Worst list it's a pretty healthy signal that the sector is "over sold." Just for fun I took a look at that ETF in "Point and Figure" view and it seems to concur nicely.
Now, that doesn't mean it can't remain "over sold" for longer, or that it might become even more over sold. However, AIM's pretty good at handling the last few gasps of these big moves. My PIC List is an example of that sort of Out Of Favor buying. As you suggest, the home building sector won't necessarily disappear, but it could be pretty tough for a while. Sector P/E doesn't look bad for now, but they're looking back at history not at the next quarter's probable lousy earnings.
Sector Book value, on the other hand, is such that this sector is now selling at 1x BV. That's one of the lowest Price/Book ratios in the market today.
I made my move last week. I replaced my Financials sector with this one. Financials is also out of favor, but probably doesn't have the recovery potential either. The ETF for Home builders represents a rather small universe of companies. Only about 30, I believe. The financials sector fund I was using was far more broadly diversified. I'm tracking both in separate accounts, so it will make an interesting foot race.
Best regards, Tom
Port Washington, WI 53074
