MH Factory Stocks Were Making Up For Lost Ground

Investors who missed out on the rise in MH factory stock prices that started last spring had a new opportunity following the terrorist attacks of Sept. 11th. Prices, which plummeted 19 percent on average by the end of September from where they were in August, ended October up 6.8 percent and by mid-November were up 11.8 percent (from September). Unlike September, however, when MH REIT stocks rose at the expense of factory stocks, the average REIT stock continued a steady climb while the average factory stock also jumped.

On the positive side, for example, Clayton Homes’ stock jumped 16 percent at the end of October. It reported its first quarter (ending Sept. 30) revenues at $306 million, its net income of $27 million, and its earnings per share of 19 cents, with all of its 20 remaining manufacturing plants profitable. Shareholders’ equity increased to $1.2 billion, according to CEO Kevin Clayton, who also predicted double-digit (10-15 percent) growth within a year. 

The company has seen its national market share rise from 8.9 percent to 11.1 percent over the last few years.

Champion stock jumped 12.5 percent by the end of October on a reported third quarter income of $2.5 million. In last year’s comparable quarter, it had a net loss of $4 million.

Palm Harbor stock jumped 25.6 percent even though sales were down from a year ago. Investors appeared to appreciate that the company was generating positive cash flow and ended the first half of the year with $62.8 million in cash and equivalents and virtually no long-term debt. Helping the cause was that new inventories per retail store were below their year-earlier level since the company decided to manufacture homes only to order. 

On the other side of coin, though, Fleetwood, Southern Energy and Oakwood continued to exhibit double-digit declines from their late summer prices.

Fleetwood stock was off 12.4 percent at the end of October after announcing that it would not meet earlier earnings projections for its current quarter.  Most of Fleetwood’s problems, though, were to be found in its RV division. RV sales are closely tied to consumer confidence in the general economy and prospects for a near-term improvement there have been pushed out well into 2002.

On the other hand, the stock rose almost four percent by mid-November as investors were impressed with the seriousness of management decisions to defer distributions on a trust security for at least the following two quarters as well as discontinue the payment of dividends on its common shares to save approximately $5 million.

Southern Energy Homes was down 15.8 percent after reporting a net loss of $271,000 for the third quarter of 2001, as compared with a net loss of $1.4 million for the third quarter of 2000. While the decrease in loss should have been greeted with some sense of enthusiasm, it appeared that investors were more concerned that net revenues were down 11 percent, primarily due to a reduction in retail home sales of 35 percent.

And Oakwood saw its stock price decline 12.3 percent as Sage Asset Management LLC liquidated its holdings the company, which previously accounted for 619,900 shares or a 6.5 percent stake. No reason was given, but the stock had hit a high of $7.70 in August and dropped to less than half that in October.