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Seven analysts and top management from sixteen sector firms examine the homebuilding industry sector in this special 89-page Homebuilding Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info506.htm

TWST: Will you begin by telling us about the sectors that you follow most closely for Wachovia Securities?

Mr. Marshall: I cover the small and mid-cap building materials manufacturers, several value-added building products distributors, and a couple of the manufactured housing producers. In addition, I cover the pre-engineered metal buildings segment, as well as several HVAC manufacturers. So my coverage is building materials manufacturers and distributors with manufactured housing thrown in.

TWST: How would you differentiate among these groups in terms of performance over the past 12 months?

Mr. Marshall: From the standpoint of fundamentals, the underlying business of the building materials manufacturers and distributors looks as if it bottomed back in April or May 2001. Since that time we've seen a steady sequential modest improvement in unit volumes and a firming in terms of pricing. The manufactured housing segment has gone through some secular earthquakes, so to speak. The segment has literally been in a tailspin for the past three years. The downward spiral was initiated by overly loose consumer credit in the mid-1990s. This loose credit led to a spike in repossessions, as a lot of folks who should have never gotten financing did. When the lenders realized the errors of their ways, they tightened their underwriting standards fairly aggressively, which in turn sparked a retail consolidation. The past 30 months have seen the number of manufactured home sales centers fall from approximately 10,000 to roughly 5,500 today. The good news is that at this juncture the retail consolidation looks like it's wound down, and that has led to some improvement in the wholesale shipment numbers over the past several months.

TWST: Are there any other companies that you would like to highlight either in the metal building or the HVAC sector?

Mr. Marshall: On the HVAC side there is a company we cover called Lennox International (NYSE:LII). It’s one of the largest manufacturers of both residential and commercial air conditioning equipment in the US. They’re also a large player in the commercial refrigeration segment and the heat transfer segment on a global basis. It’s a big cyclical company. It’s been nothing but bad news for the HVAC segment over the past two years. The stock looks like it’s found a bottom here at $9-$10 a share. It’s something that is going to improve as the general economy improves. We find that focus on the commercial refrigeration market is fairly interesting. When you take into account that approximately 60%-70% of the produce in China or other developing countries spoils on the way to market, you see that going forward there is going to be a big demand for refrigeration products.

TWST: Does that include refrigerated trucks?

Mr. Marshall: No, not trucks, more along the lines of refrigerated warehouses, produce display cases, etc. We believe that segment is going to see growth over the next 10 years. In addition, there is the residential air conditioning segment. Europe and North America are fairly built out and relatively mature in terms of residential HVAC demand, but Asia, India, and South America are up and coming markets, which, as they become affluent, will have growing demand for residential air conditioning products.

TWST: How do you read the investor sentiment out there surrounding these stocks?

Mr. Marshall: There has definitely been renewed interest over the past eight to 12 months. Looking back to 1998, there was a big sucking sound, and that sound was liquidity being pulled out of old economy segments, such as building materials and manufactured housing, as the capital was being redeployed into the new economy. That has totally reversed at this point. There is a renewed interest in companies with real earnings, real cash flow. All the groups I cover at this point, by historical valuation parameters, peaked in the early to mid-1990s. So I think you’re not only going to have improving demand going forward, but also a valuation expansion, a multiple expansion, as investors move back into these areas.

This special issue includes:

1) Homebuilding Industry - In an in-depth (13,500 words) Analyst Roundtable, Scott H. Campbell, Vice President-Homebuilding and REIT Equity Research at Raymond James & Associates, David Jarrett, Vice President at Credit Lyonnais Securities (USA) Inc., Samuel A. Lieber, CEO of Alpine Management & Research, LLC, Joseph Sroka, Vice President at Merrill Lynch & Co., Inc., James Wilson, Managing Director at Jolson Merchant Partners Group, LLC, examine the outlook for the sector including industry consolidation, interest rate outlook and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance of eight sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Outlook for Homebuilding Stocks - In an in-depth (5,000 words) Analyst Interview, Carl E. Reichardt, Principal at Banc of America Securities, examines the outlook for the sector including and shares specific stock recommendations.

4) Building Materials Manufacturers - In an in-depth (3,900 words) Analyst Interview, Robert Marshall, Senior Analyst following the housing/building materials sector at Wachovia Securities, examines the outlook for the sector including and shares specific stock recommendations.

5) CEO interviews (average 2,500 words). Top management of sixteen sector firms examine the outlook for their firm and the sector.