Monday, March 26, 2007

Lennar (LEN)

Lennar (LEN) and Gamestop (GME) will be among the most notable companies posting earnings Tuesday morning. At LEN Earnings of 49c are expected on revenue of 2.54 bln - down from the year before of course. It was oh so tempting to pick up LEN puts this afternoon, but I refrained. If the world were normal and things worked the way you would expected them in above board manner, a put bet would make perfect sense. But with all sorts of accounting tricks available to home builders to delay write offs and the option for home builders to call a bottom in the housing market each quarter with impunity, buying puts ahead of earnings seemed too risky. If the bottom falls out tomorrow, it won't be a one day affair and there will still be the opportunity to buy puts. A real selloff after earnings in a home builder would also be a significant event and mark a nastier turn in sentiment against them. But given the ability for home builders to promise better times ahead and sugar coat - who knows? LEN could rise tomorrow. Maybe I've become too much of a cynic.

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