Mr. Grodsky: Basically, times are not particularly bad for home builders right now. They are not the best of times nor are they the worst of times. It is kind of a neutral time for them. Some of them are setting earnings records and some of them are not. Most of them are profitable and doing very well. Many of them have stock market valuations that are more often associated with bear markets than with bull markets.
TWST: Is there a best case scenario of when to buy these stocks?
Mr. Grodsky: Historically, the best time to buy home builders is at the
bottom of a recession or just before the bottom of a recession when many
of them are losing money. The stocks are very depressed and interest
rates are still high. People think everything is hopeless but that is
usually the best time to buy them. This present business cycle has been
extremely elongated. It has been a long time since we have hit the
bottom of the cycle, going back to about '90 or '91. For investors who
are used to four year cycles for home builders, these -- which are
considered an "early cycle" group -- have not been early in the cycle
for a long time, maybe since before many of today's money managers were
in the business.
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