Building momentum
Constructing profits at Smith Douglas
Good morning, scaffold strategists. This is your Stock Market Rundown for February 16th, 2024. Thanks for joining me. Let’s get started:
TODAY’S TOP STORY: BUILDING YOUR DREAM
Sky-high mortgage rates, and a slowing economy... it really doesn’t point to a boom for homebuilders. So why did a homebuilder just IPO for more than a billion bucks?
Easy: single-family homebuilding rates have surged in many regions of the US, including the Midwest and the South. Years of underbuilding have spurred an acute housing shortage.
Now, the National Association of Homebuilders says we’re heading for a “housing renaissance”. And anticipated Fed rate cuts in 2024 could spur continued easing in mortgage rates, which would get even more buyers off the sidelines and into their white-picket-fence dreams.
So it’s no surprise homebuilder Smith Douglas pulled the trigger on going public, and was valued at over $1 billion in its market debut. It’s one of the fastest-growing single-family builders, and targets entry-level homebuyers—the average selling price for one of its homes is $330,000.
Smith Douglas’ founder, Tom Bradbury, founded and sold another homebuilding company in the 1990s. After the 2008 financial crisis, he decided to go for a repeat performance, and started constructing homes in Atlanta, going on to build thousands.
He’s got many willing buyers: the pandemic caused a structural change where people are spending more time at home. Why waste cash on overpriced restaurants when you can stay home, make lasagna, and play Risk? No wonder homebuilders are as confident as Conor McGregor stepping into the ring.
SO WHAT ELSE IS GOING ON?
Want to build a new factory but don’t have the cash flow? Why not borrow a billion bucks? Confident investors are snapping up corporate bonds as recession fears recede.
Google is urging the US government to block spyware vendors who sell surveillance software. Guess they don’t appreciate competitors threatening their monopoly on reading our emails and tracking our internet use.
Three years ago, BP (formerly known as “British Petroleum”) said they would cut oil and gas production by 40% by 2030. Um… yeah… about that. They’ve now pared that promise back to 25%... and they’re still developing new fossil-fuel projects. Guess it was easier to take the “petroleum” out of their name, than out of their income statement.
A collapsed crypto scam is being sued in New York State for defrauding investors of billions. Wild how fast the entire crypto industry went from dream-come-true to get-poor-quick.
And that's a wrap for the week, friends. Make sure to tune in first thing Monday morning for more of the usual nonsense. Yours in capitalism, The Axe