CALC – A Calculated Move
I’ve had my eyes on CALC for a few days now and just noticed that it started to make a move today. California Coastal Communities (NASDAQ: CALC) ended the day at $1.70, up 13% on 6x average volume. I’ve been wondering when CALC will get some attention because it has a book value of $5.42 and yet, it trades at such a discount to book. Furthermore, the whole homebuilder sector has made a nice rally lately but CALC hasn’t made much of a move.
There’s good reason for that, of course — CALC is having liquidity problems. It needs to amend it’s credit facility with KeyBank before Dec 31, 2009 or else it risks breaching certain debt covenants with the bank. However, looking at the history of CALC’s relationship with KeyBank, it looks like an amendment with KeyBank is very likely to happen soon. I can’t imagine KeyBank not allowing CALC more time to sell the homes it builds since the volume of home sales is picking up and the price on residential real estate is starting to stabilize in California. In any case, uncertainty is certainly lurking with CALC and nothing depresses a stock’s price more than uncertainty.
However, I’m still bullish on CALC for a few good reasons.
* Improving Economy & Real Estate Markets – The overall real estate market is improving in California and across the US. Home prices are stabilizing and sale volume is improving.
* Restructuring Debt – Any news of an amendment to CALC’s credit facility with KeyBank will move this stock up. I believe this will happen soon considering they seem to have a pretty good relationship with the bank and that their overall business has stabilized. They just need a little more time to get through the real estate glut and I think KeyBank will give it to them.
* Long Term – Looking at CALC long-term, I think the company just needs more time to work through the real estate glut. It looks like the general trend is improving for real estate and that should translate into higher prices and demand for homes in California. Last quarter, they reported significantly higher average sale prices per home compared to Q1. The general trend should improve in Q3. In the meantime, the company is aggressively slashing it’s costs, reducing headcount, and doing everything it needs to do to stay in the game until the real estate market improves.
* CALC Volume & Price – The trading volume in CALC stock has picked up quite a bit. As I mentioned earlier, today’s trading volume is 6x the average 10 day volume with a price move of +13%. With only 8.23 million shares float, it won’t take a lot of volume to move the stock price.
I picked up some shares of CALC today around $1.68 for those reasons above. Good luck and as always, do your own due diligence!
p.s. Some interesting footnotes:
* On 4/15/2009, 1,775,300 shares were traded and the stock went up from $0.87 to $0.97. Looks like someone bought a HUGE amount of CALC that day.
* The volume of 1,775,300 on 4/15/2009 was also the last time CALC’s trading volume broke 100,000 — until today (157,258 shares traded).
* Merrill Lynch (now Bank of America) owns 9.45% of CALC (as reported on 6/30/2009).
