A subscriber who’s been keen on shorting this flying pig sent me an email yesterday wondering if it’s time. My take is that June’s rally to $21 was Beazer’s death rattle. Even so, the stock, at a current $18, is no longer worth a bear’s time and effort. The crash of 2006-08 was another story. During that time (see chart inset), the stock fell from $410 to a bear market low of $1.20 (!) There was plenty of money made on the short side, obviously; but this time, especially if Beazer shares die a slow death, there will be only crumbs. The logical way to leverage BZH’s death spiral would be with put options, but they are priced as though the market makers are as down on the stock as we are. Beazer trades with a historical volatility of 29, but the near-the-money puts are sporting implieds of twice that or more. Bottom line, we should look for homebuilder shares with more meat on them if we’re going to try to pick the carcass clean.
