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5. D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 52
D.R. Horton, Inc. (NYSE:DHI) is a Texas-based homebuilding company that constructs and sells residential homes under the D.R. Horton, America’s Builder, Express Homes, Emerald Homes, and Freedom Homes brands. Over the next five-to-ten years, a new batch of homebuyers will enter a market in which D.R. Horton, Inc. (NYSE:DHI) offers affordable housing, which positions it as a beneficiary over the coming years.
In July, real estate and construction stocks gained despite recession fears, as dampening economic growth would result in slower rate hikes, which bodes well for potential homebuyers. On July 12, JPMorgan analyst Michael Rehaut reiterated an ‘Overweight’ rating on D.R. Horton, Inc. (NYSE:DHI) but lowered the price target on the shares to $80 from $82.50.
According to Insider Monkey’s data, 52 hedge funds were bullish on D.R. Horton, Inc. (NYSE:DHI) at the end of Q1 2022, with combined stakes of about $2 billion. John Armitage’s Egerton Capital Limited is the leading shareholder of the company, with 7.8 million shares worth $582.5 million.
Here is what Third Avenue Management Real Estate Value Fund had to say about D.R. Horton, Inc. (NYSE:DHI) in its Q1 2022 investor letter:
“Outside of these additions, the Fund also sold “out-of-the-money” put options on the common stock of D.R. Horton, Inc. (“DR Horton”)-the largest homebuilder in the U.S. that accounted for nearly 1 out 9 new homes sold in the U.S. last year. Having followed the company for years, Fund Management can say without hesitation that DR Horton is an incredibly efficient builder focused on delivering quality product at the entry-level price point (its average selling price was less than $325,000 last year) with leading positions in key Sunbelt markets including Dallas, Houston, Austin, Atlanta, and Phoenix.
While the near-term outlook for DR Horton is somewhat uncertain given mortgage rate and supply chain volatility, the medium-to-long-term prospects for volume-based homebuilders with super-strong balance sheets and scale advantages seem promising (such as DR Horton and Lennar Corp.) in Fund Management’s view. This is especially the case when considering that:
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Residential inventories are at record- low levels in most major markets whether gauged by “month’s supply” or aggregate units available,
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Demand for single- family residences is accelerating as the largest generation in U.S. history (the “millennial cohort”) enters its prime home buying years and desires more space not only due to “life events” but also “remote” and “hybrid” working arrangements, and
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Significant inflation in rental rates for multi-family units in urban areas has left the rent-to-own proposition for single- family homes in suburban areas in a compelling range…” (Click here to see the full text)
