Does the obvious work? In this case it did!
Homex is one of
Mexico’s largest homebuilders. In February 2005, shares of HXM were moving
up quickly on news that first-time homebuyers in Mexico could finance their
purchase thru a government sponsored mortgage program. And title insurance
was now available for the first time, providing non-Mexican buyers with
additional protection. Additionally, Homex’s starter homes were prices
around $40,000, making them attractive to a large emerging Mexican middle
class.
Shares were rising on
increasing volume, and we picked up some stock in the mid to high 20’s.
Several days later, the shares spiked above $33 on declining volume,
signaling to traders that the move probably would not be sustainable. We
sold, and sure enough HXM fell back to the mid $20 range within a few short
months. Don’t you love it when stocks act the way they’re supposed to?!
Gabriel B. Wisdom
Managing Director
American Money Management, LLC
SEC Registered Investment Adviser