KB Home is currently a risky stock to buy despite its low price, evidenced by the company’s disinterest in buying its stock, CNBC’s Jim Cramer said Monday.
“If KB starts to buy back his stock aggressively, I’ll be there with them. If they don’t, I’ll stay on the sidelines,” said the “Mad Money” host. KB Home CEO Jeffrey Mezger told the company’s first quarter earnings call on March 23 that the company will “navigate according to our operational needs” when asked why KB Home is not buying its stock.
Earnings and KB Home’s top line missed Wall Street’s expectations in first quarter results, causing the stock to plummet from around $ 38 to around $ 33.
Shares in the construction company were up 0.42% on Monday after falling to a new 52-week low earlier in the day. Wolfe Research downgraded KB Home from outperforming to peer perform in the morning.
While KB Home’s low share price might be tempting to investors, Cramer said it’s a red flag.
“Home builders are cyclical stocks that rise and fall with the economy at large. Cyclicals get so cheap when Wall Street is worried about earnings estimates,” he said.
Cramer also expressed concern about 30-year US Treasury yields, which hit their highest level since mid-2019. Yield changes are “the most important benchmark for mortgage rates and an aggressive Federal Reserve will not. than pushing it higher, “he said.
The Federal Reserve is expected to take several interest rate hikes this year after approving a quarter percentage point interest rate in March, with some traders expecting more aggressive hikes after Fed Chairman Jay Powell promised all beginning of this month to take a strong stance against rising inflation.
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