market folly

Continuing our coverage, today we're posting up more notes from the Value Investing Congress.  Below are notes and the slideshow presentation from Aaron Edelheit of American Home Real Estate Company.  His talk was entitled, "Housing: The Foundation of the Next Bull Market."

He says the housing crisis crushed the middle class (loan qualifications really difficult).  Rental demand is surging +8.2mm since 2010.  Rental rates are climbing, Equity Residential raised rents 5.5% in Q1 2012.  Ivy Zelman expecting rents to rise 6% per year nationally.

98% of metro areas are cheaper to buy than rent (Per Trulia).  Implications: Residential REITs, Home Depot (HD) and Lowes (LOW), homebuilders will do well.


His Pick: Lender Processing Services (LPS)

- $2 billion market cap. Housing at bottom: service 50% of mortgages by volume.  Return to normal volumes will help them.  Spun out of Fidelity National (FIS) in 2008.  FCF "juggernaut" > $300mm FCF per year.  Repurchased 11% of stock in last year.  Could have $5 EPS and 12x multiple.  Risk is lawsuits, but manageable. The above notes are courtesy of Kyle Mowery from GrizzlyRock Capital.


Embedded below is Aaron Edelheit's presentation on the housing market:




Be sure to click here for other presentations from the Value Investing Congress.