Beazer Homes: Look Out Beloooow!!!

Investment Research Dynamics

I have to hand it to you on your research on BZH. I bought your report on BZH a few weeks ago and more or less forgot about it. Then I noted the BZH earnings release last Friday. Reread the report and thought, time to act.

Shorted 400 shares BZH Thursday January 29 @ 17.05 and picked up 50 BZH FEB 20. 2015 strike 15 PUT contracts right before the close @ 18 cents/contract. I’ll be honest, BZH had just dropped quite a bit from the $19 area to $17, so I thought the window for making money had closed. But the more I read the report, the more I thought you were on to something.

Sold the PUTS today for 70 cents/contract. Going to hold the stock short for awhile. I think it bottoms short term here in the 13-14 area.

Thanks all to you. The best $25 I ever spent. Looking forward to your new report that you say, “Wall Street would never write.”   - BZH research buyer

Beazer reported its latest quarter (Q1, FY 2015) on Friday morning.   When you blow away the heavy smoke blown by the CEO, Beazer’s home closings (actual unit sales) plunged 14.7% vs. the same quarter last year.  Forget about “orders” and selling prices, unit sales volume was crushed.  Its cash down 57% from just thee months ago and inventory climbed 7%.   The stock dropped 8.5% on Friday.  BUT, it dropped another 9% today on 3x its average volume and on no news:

The BZH report buyer sent that email this afternoon.  He netted $2527 on the puts and has a $1,000 in the stock short, which he’s holding.  I gave him some ideas to use options to trade around the stock stock using puts.  I also suggested he take $25 of that $2527 and buy the report I published on October 1st (updated it November 25th).   That stock has a high exposure to Texas and has lot further to fall in price than BZH.

I have emphasize that shorting the homebuilders takes patience.  I have also said there’s an element of luck with using puts, but shorting this sector will pay off handsomely for anyone who can short the stock outright and have the temperament to be patient and hold through irrational market bounces.    The stock from October 1st, is only $2 above the price on my November 25th update,  despite the recent big bounce in the sector.