5 Best Home Builder Stocks To Buy Now

2. D.R. Horton, Inc. (NYSE:DHI)

Number of Hedge Fund Shareholders: 46

Hedge fund ownership of D.R. Horton, Inc. (NYSE:DHI) remained flat during Q1 as the top homebuilder in the U.S. held on to second place among hedge funds’ favorites in the space. Edgar Wachenheim’s Greenhaven Associates, which is also extremely bullish on the top stock on this list, was the largest shareholder of DHI on March 31, owning 3.65 million shares.

Wedbush was bullish on affordable builders like D.R. Horton, Inc. (NYSE:DHI) and Skyline Champion Corporation (NYSE:SKY) heading into 2023 given what the firm assumed would be a favorable rate environment. D.R. Horton was also named a Top Pick for the first half of 2023 by BTIG, which had a $101 price target on the stock in early January. D.R. Horton is projecting Q3 revenue of between $8 billion and $8.5 billion, well ahead of the consensus estimates of $7.12 billion.

Baron Funds shared its bullish sentiments on D.R. Horton, Inc. (NYSE:DHI) in the fund’s Q4 2022 investor letter:

“The shares of D.R. Horton, Inc. (NYSE:DHI), the number one homebuilder by volume in the U.S., gained 31% in the most recent quarter following strong business results.

We are bullish about the long-term prospects for D.R. Horton primarily due to two key considerations:

1) We believe the company is positioned to perform well over time given its status as the largest and lowest-cost producer in the entrylevel home segment for first-time buyers and baby boomers looking for an affordable home. In the last fiscal year, approximately 67% of D.R. Horton’s home sales were for prices less than $400,000, thereby enabling the company to satisfy the home affordability constraints of many potential home buyers.

2) We are enthusiastic about D.R. Horton’s continued transition to a stronger and more asset-light balance sheet by outsourcing its land development spending needs to third-party developers such as Forestar Group Inc. D.R. Horton’s transition to a less capital-intensive business model is leading to stronger cash-flow generation, lower debt levels, an ability to pursue more share repurchases and/or other investment opportunities, and a higher-valuation multiple.”