Bull’s Eye Report: M.D.C. Holdings (MDC)

Homebuilders look ready to run, but be sure to use a stop-loss for this trade.

   

At StateoftheMarkets.com, we strive to “own the best and ignore the rest” in our equity portfolios. Toward this end, each day we search our database for a “top stock” (a top rated company in terms of earnings strength as well as company and industry performance) that presents a strong technical “set up” and a good entry point.

In short, when our equity team is looking to add a stock to one of our portfolios, the “bull’s eye” stock shown below is generally their first choice.

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Company Symbol Industry Stock Rating YTD% Gain S.T.
Stop Loss
M.D.C. Holdings Inc MCD Homebuilding 10.0 +5.86% $37.29


Why We Like The Stock:

M.D.C. Holdings (NYSE:MDC) is our most compelling buy today due to the fact that it is a “10.0 stock” (in terms of earnings strength and company/industry performance) in one of the top-rated and best performing sub-industries in the market – homebuilders.

Taking a look at some homebuilders over the past year, you can see that the sub-industry has been a rocket ship. Homebuilders like Toll Brothers (NYSE:TOL), D.R. Horton (NYSE:DHI), NVR Inc. (NYSE:NVR), Ryland (NYSE:RYL) and PulteGroup (NYSE:PHM) rallied straight through 2012, barely taking a moment to pull back throughout the year. While it usually isn’t wise to chase extended weekly charts, MDC is an interesting short-term trade. The stock has pulled back this past week off of its $42 highs. There is clear support right at $38.00, which gives MDC some wiggle room.

We would set a tight stop at the 50-day moving average to reduce the potential downside. And with the immediate upside to $42, MDC represents a low-risk, high-reward trade. Whether homebuilders have any rally left in them is a topic of debate in itself, but regardless of the longer-term outlook, MDC is an excellent short-term buy at current prices.

We Would Be Buyers:

At the current price (~$38.75), or on a pullback to $38.00.

Company Profile:

M.D.C. Holdings, Inc. (MDC) operates in two business segments: homebuilding and financial services. The homebuilding operations consist of wholly owned subsidiary companies, which purchase finished lots for the construction and sale of single-family detached homes to homebuyers under the name Richmond American Homes. The homebuilding operations operates in four business segments: West (Arizona, California, Nevada and Washington); Mountain (Colorado and Utah); East (Virginia and Maryland, which includes Pennsylvania, Delaware, and New Jersey), and other homebuilding (Florida and Illinois). The financial services and other segment consists of HomeAmerican Mortgage Corporation (HomeAmerican), which originates mortgage loans for the homebuyers; American Home Insurance Agency, Inc. (American Home Insurance), which offers third-party insurance products to the homebuyers, and American Home Title and Escrow Company (American Home Title), which provides title agency services.

Stock Rating:

The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 – 10 with 10 being the highest.

Disclosure:

At the time of publication the editor and affiliated companies own the following positions:

None

Note: Positions may be bought or sold while this publication is in circulation without notice.

 

M.D.C. Holdings – Last 3 Months

 Bull's Eye Report: M.D.C. Holdings (MDC)

 

M.D.C. Holdings – Last 12 Months

 Bull's Eye Report: M.D.C. Holdings (MDC)

 

M.D.C. Holdings – Last 5 Years

 Bull's Eye Report: M.D.C. Holdings (MDC)


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