Exiting our 2% position in James Hardie today and taking the 15% short-term gain (+14% price, +1% fx).
Despite a decrease in mortgage rates to 6.5% this past week and an increase in available housing inventory, sales of existing homes continue to falter, remaining at levels comparable to the lowest points of the 2010 Housing Bust. This stagnation persists despite more homes on the market, as demand weakens due to prices that remain prohibitively high.
Though housing prices are indeed decelerating, it is unclear whether it will be enough to stimulate demand. P/E for $JHX is at 30x, which is too expensive for the amount of uncertainty right now in the market. There is an expectation that mortgage rates at 6% or even at 5.5% will cause people to start buying again en masse. The possibility that these expectations fall short is a very real risk that we have no visibility into.
We’d rather shift our bets to other stocks in which we have higher conviction.
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