Berkshire Hathaway bought more than $212 million of Lennar stock over three trading days after the homebuilder's shares sold off on weak results. The purchases push Berkshire's stake in Lennar above 10% and mark an 81% increase in its holding since the end of the second quarter.
Berkshire Hathaway added nearly 2.5 million Lennar shares over three trading days, a purchase worth more than $212 million, after the homebuilder's stock sold off following a weak earnings report. The buying pushed Berkshire's stake in Lennar above 10%.
A stake built on a sell-off
Since taking over as CEO at the start of the year, Greg Abel has leaned on Warren Buffett and longtime investment manager Ted Weschler, who controls about 6% of Berkshire's portfolio. Abel and Weschler built up the Lennar position gradually before accelerating it once the stock dropped. Overall, Berkshire has added nearly 11 million Lennar shares since the end of the second quarter, boosting its stake by 81%.
The move follows the same pattern Abel has shown elsewhere this year. He initiated a major investment in Alphabet during his first six months as CEO and completed the acquisition of homebuilder Taylor Morrison, which will merge operations with Berkshire's Clayton Homes.
Why the stock sold off
Lennar's total revenue declined 8.7% year over year last quarter, while homes delivered fell 3.4% and the average sales price dropped 2.9%. Management also cut its full-year delivery target to 80,500 units at the midpoint, down from 82,500. Higher incentive offers, including buying down mortgage rates for buyers, narrowed gross margin to 15.8% from 17.5% a year earlier.
The stock now trades at 0.91 times its book value, with Lennar's market cap near $20 billion.
A bet on the housing shortage
Berkshire's purchases reflect a broader bet on U.S. housing, not just on Lennar. The company also owns shares of D.R. Horton, the largest U.S. homebuilder, and the U.S. still faces a severe housing shortage estimated at between 2 million and 5.5 million units. That shortage ultimately favors homebuilders with the scale to develop new housing starts, even as affordability challenges weigh on near-term sales.
Source: The Motley Fool
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