The U.S. housing market, grappling with substantial interest rate hikes imposed by the Federal Reserve, is facing unprecedented challenges. However, the influential investment guru Warren Buffett is displaying remarkable confidence in the sector, as evident from Berkshire Hathaway Inc.’s (NYSE:BRK) latest filing with the Securities and Exchange Commission (SEC).
Investors, drawn by Buffett’s storied history of consistently generating substantial returns, have closely scrutinized the 13F filing. A testimony to the investment prowess of Warren Buffett are the returns of Berkshire Hathaway from 1964 to 2022 totaled a staggering 3,787,464%, dwarfing the S&P 500’s modest 24,708% gain during the same timeframe.
The legendary investor is renowned for his contrarian philosophy, encapsulated in his famous adage, “Be fearful when others are greedy, and be greedy when others are fearful.”
D.R. Horton Inc. (NYSE:DHI) – A Strategic Addition
Berkshire Hathaway’s 13F filing revealed the acquisition of a notable stake in D.R. Horton during the second quarter, comprising 5,969,714 shares. This investment, valued at $693.6 million, underscores Buffett’s conviction in the Arlington, Texas-based homebuilder, which holds the distinction of being the largest in the U.S. by volume.
D.R. Horton’s expansive footprint spans 33 states, offering homes across a diverse price spectrum ranging from $200,000 to well over $1 million. The company also engages in the construction and sale of single-family rental and multifamily rental properties.
In the fiscal quarter concluding on June 30, D.R. Horton posted an 11% year-over-year surge in consolidated revenue, reaching $9.7 billion. Notably, homes closed witnessed an 8% increase to 22,985 units, with net sales orders surging 37% to 22,879 homes. However, the quarter saw a 19% decrease in net income from the prior year, settling at $1.3 billion.
Although the revelation of Berkshire’s stake initially propelled D.R. Horton’s shares, subsequent retracements followed. Nevertheless, the stock has achieved an impressive 28% ascent in 2023.
Lennar Corp. (NYSE:LEN) – An Insight into Demand Trends
Another major entrant in Buffett’s strategic moves is Lennar Corp., a prominent player in the home construction sector since its establishment in 1954. Lennar’s operations span multiple markets across the U.S., having delivered 66,399 homes in the fiscal year 2022.
Apart from its core homebuilding activities, Lennar also offers an array of financial services, encompassing mortgage financing, title insurance, and closing services. In the second quarter of fiscal 2023 (ending May 31), the company’s revenue from home sales exhibited a 4% year-over-year decline, settling at $7.6 billion. This dip was attributed to a 7% decrease in average sales price, offset to some extent by a 3% upswing in home deliveries.
Stuart Miller, Lennar’s Executive Chairman, attributed an acceleration in demand to consumers’ acceptance of a “new normal” range for interest rates. Berkshire’s acquisition of 152,572 Lennar shares in Q2 marked an investment valued at $17.8 million.
NVR Inc. (NYSE:NVR) – Diverse Ventures in Housing
Buffett’s strategic moves also extended to NVR Inc., with Berkshire Hathaway procuring 11,112 shares of the company during the second quarter. At the current share price of $6,078, this stake commands a valuation of $67.5 million.
NVR’s operations encompass home construction under the banners of Ryan Homes, NVHomes, and Heartland Homes. In addition, the company boasts a building products division, a mortgage subsidiary, and a settlement and title services subsidiary. The second quarter of 2023 witnessed a remarkable 27% year-over-year surge in new orders for NVR’s homebuilding segment, totaling 5,905 units. However, the average sales price of these orders dipped by 5% compared to the previous year, settling at $447,300.
NVR’s stock performance in 2023 has surpassed that of D.R. Horton and Lennar, boasting an impressive 32% year-to-date surge.
While investment in homebuilder stocks remains a popular avenue for market exposure, innovative ventures now offer individuals the chance to earn passive income from real estate with minimal involvement. As the housing market landscape evolves, opportunities continue to diversify, allowing investors to align with their financial goals.
Source: benzinga.com
