KB Home once was one of the S&P 500 companies which is fairly unique for homebuilders that normally do not grow out of the “mom & pop” phase. As such this stock should be a good indicator of where the housing market might be going in the US.
3 years ago we also blogged about this stock. There we showed the a-b-c X a-b-c alternative count. At this point how exactly we came down is less relevant than how we rebounded. This stock hit its low in 2011, out of phase with the market in general and perhaps more aligned to interest rates for which we still believe the bottom was in 2013. The rebound is a perfectly clear A-B-C correction which implies that the trend is still down. It looks like we are in a third wave and the stock has already dropped 36%. The stock today is still trading at a p/e above 30, roughly double the norm and with 10-year Treasury notes at 3%.