Who said homebuilder stocks were over? Champion Enterprises (CHB ) is surging, trading at 15.57, close to its 52-week high of 16 -- almost double its price a year ago. Unlike other builders, Champion makes factory-built houses, a niche business that runs in a different cycle from traditional housing. "We like Champion's strategy and growth as manufactured housing is coming back after a six-year downturn," says Barbara Allen of Avondale Partners. She rates it "outperform." She expects Champion to earn $1 a share on sales of $1.5 billion in 2006 and $1.28 on $1.8 billion in 2007, vs. 2005's 61 cents on $1.2 billion. She sees the stock at 19 in 12 to 18 months. Kenneth Nugent of Value Line (VALU ) predicts Champion will beat the market during the next 6 to 12 months, based on its recent price and earnings momentum. He says it's set to post a "hefty earnings rebound this year with double-digit growth thereafter." The outlook for 2008 through 2010 is bright, he says.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial