Warren Buffett’s Berkshire Hathaway now owns roughly 5.7 million shares of the largest homebuilder in the U.S., D.R. Horton, despite rising mortgage rates and other industry headwinds.
"Buffett diving into select homebuilders like D.R. Horton makes sense from a long-term view, which is standard Berkshire practice," said Daniel Bustamante, managing partner and CIO of Bustamante Capital.
"Even in the face of housing affordability, D.R. is trading at attractive multiples with strong free cash flow," he added.
|BRK.A||BERKSHIRE HATHAWAY INC.||547,469.99||+24.94||+0.00%|
|DHI||D.R. HORTON INC.||125.96||-0.31||-0.25%|
D.R. Horton Fast Facts
- Founded in 1978
- CEO Donald R. Horton
- Operate in 45 of home building's top 50 markets
- Serve new home buyers as well as those downsizing
- In the 3Q: 66% of homes closed were over $400,000
"D.R. Horton has also shown the foresight to start developing a rent to own model as home purchases slow. They have been focusing more on single family rental development versus actual homes for sale, while investing over $1 billion in that arm the last three years," Bustamante said.
Data compiled by the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, showed confidence among builders in the U.S. housing market unexpectedly plunged in August as a spike in mortgage rates dampened consumer demand for new homes.
|XHB||SPDR SERIES TRUST S&P HOMEBUILDERS ETF USD||81.89||-0.53||-0.64%|
The index fell to a three-month low; still, Buffett sees something in the sector.
"For the short term, some homebuilders will have to reset on price points, but Warren always seems to be right, so the long-term play is evident," Bustamante told FOX Business.
"With the Fed rumored to deliver more tightening and if Treasury yields have another advance over the next month or two, we could easily have further pressure for housing stocks," he said.
Shares of D.R. Horton are up roughly 5.3% over the last three months and nearly 31% year-to-date. Over the last year, shares have ballooned approximately 56%.
The Oracle of Omaha also bought 11,000 shares of Ryan Homes' parent company NVR and more than 152,000 shares of the home construction company Lennar.