Perspective on Dow and Homebuilders

By William Trent, CFA of Stock Market Beat

Although the last week managed to shake investor’s (over)confidence, it wasn’t long ago that all the talk was about the new records being set by the Dow. And with all the talk of a bursting housing bubble, one might wonder whether those stocks are still even around.

Which is why we were a bit surprised to see the 5-year performance chart common to SEC filings while we were reviewing the 10K of Small Cap Watch List, Mid Cap Watch List and Large Cap Watch List member (yes – all three – blame S&P for their overlapping market caps in the indices, which made it suitable for all three lists) NVR Inc. (NVR).

The Dow has done very little over the last five years (though we don’t expect the next five to be much better) and, despite the rocky year the homebuilders had in 2006 there could be more room for declines ahead.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Ceradyne (CRDN) put options; Tempur-Pedix (TPX) put options; Landstar (LSTR) put options; Plantronics (PLT) put options

http://stockmarketbeat.com/blog1/