Lennar Corp. (NYSE: LEN) — This major homebuilder forged a turnaround in 2012, with earnings for the fiscal year, ended in November, estimated to be $2 per share, up from $0.48 in FY 2011. But the stock has doubled in one year and is showing signs of fatigue. LEN is selling at 24 times next year’s earnings — a number that in the building group is overvalued.
Technically, it is sitting astride its 20-day and 50-day moving averages, and a break below these key support lines could result in a sharp decline to its major support, the 200-day moving average at $32. On Thursday, the MACD indicator flashed a sell.
If you own LEN, sell and take a profit. Traders may want to short it on a break under $36 with a target of $32. As with all short sales, enter a stop-loss order to protect against unlimited losses. Also, check with your broker for any unusual margin requirements and the ability to borrow the stock.