The U.S. housing market has been under pressure as a result of substantial interest rate hikes from the Federal Reserve. But that hasn’t deterred legendary investor Warren Buffett from placing big bets in the sector.
In its latest 13F filing with the Securities and Exchange Commission, Buffett’s company Berkshire Hathaway Inc. (NYSE:BRK) disclosed new stakes in three U.S. homebuilders.
Investors often pay close attention to Buffett’s 13F filings because of his track record of generating consistent returns over the decades. From 1964 to 2022, Berkshire delivered total returns of 3,787,464%, substantially outperforming the S&P 500’s 24,708% gain during the same period.
Buffett is also no stranger to making contrarian moves. He famously said, “Be fearful when others are greedy, and be greedy when others are fearful.”
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Here’s a closer look at the three companies he just loaded up on.
D.R. Horton Inc. (NYSE:DHI)
Berkshire’s 13F filing revealed that it bought 5,969,714 shares of D.R. Horton in the second quarter. At the current share price, the stake is worth $693.6 million.
Headquartered in Arlington, Texas, D.R. Horton is America’s largest homebuilder by volume. It operates in 33 states and has a diverse product portfolio with sale prices ranging from $200,000 to over $1 million. The company also builds and sells single-family rental and multifamily rental properties.
In the fiscal quarter that ended June 30, D.R. Horton’s consolidated revenue increased 11% year over year to $9.7 billion. Homes closed grew 8% to 22,985, while net sales orders rose 37% to 22,879 homes.
Net income, on the other hand, decreased 19% from a year ago to $1.3 billion for the quarter.
D.R. Horton shares initially surged after Berkshire revealed its stake but later retraced those gains. Nevertheless, the shares have risen over 28% in 2023.
Lennar Corp. (NYSE:LEN)
Lennar is another heavyweight player in the home construction business.
Established in 1954, Lennar builds homes in various markets across the country. It delivered 66,399 homes in fiscal 2022.
In addition to its core homebuilding operations, the company offers financial services, including mortgage financing, title insurance and closing services.
In the second quarter of Lennar’s fiscal 2023, which ended May 31, its revenue from home sales slipped 4% year over year to $7.6 billion. The decline was because of a 7% decrease in average sales price, partially offset by a 3% increase in the number of home deliveries.
Lennar Executive Chairman Stuart Miller said that demand has accelerated as consumers “have come to accept a ‘new normal’ range for interest rates.”
Berkshire acquired 152,572 Lennar shares in the second quarter, a position valued at $17.8 million today.
NVR Inc. (NYSE:NVR)
Buffett’s company also picked up 11,112 shares of NVR in the second quarter. With NVR shares trading at $6,078, the stake is worth $67.5 million.
NVR constructs and sells homes under the brands of Ryan Homes, NVHomes and Heartland Homes. It also has a building products division, a mortgage subsidiary and a settlement and title services subsidiary.
In the second quarter, new orders for NVR’s homebuilding business increased by 27% year over year to 5,905 units. But the average sales price of new orders in the quarter was $447,300, down 5% compared to a year ago.
NVR stock has outperformed D.R. Horton and Lennar in 2023 — shares are up 32% year to date.
While investors can leverage homebuilder stocks to access the housing market, new companies have innovated ways for people to earn passive income from real estate. Here’s how to invest in rental properties with as little as $100 while remaining completely hands-off.
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This article Warren Buffett Bets On The U.S. Housing Market With 3 New Investments — Be Greedy When Others Are Fearful? originally appeared on Benzinga.com
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