4. D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 44
D.R. Horton, Inc. (NYSE:DHI) was founded in 1978 and is headquartered in Arlington, Texas. It operates as a homebuilding company in the United States under the D.R. Horton, America’s Builder, Express Homes, Emerald Homes, and Freedom Homes brands. It is one of the top housing stocks to watch as price declines continue.
On August 31, Raymond James analysts Buck Horne and Andrew Cooper added D.R. Horton, Inc. (NYSE:DHI) to Raymond James’ “Analyst Current Favorites” list, which contains present favorite stock ideas from the analysts in the firm’s equity research team. On September 19, KeyBanc analyst Kenneth Zener upgraded D.R. Horton, Inc. (NYSE:DHI) to Overweight from Sector Weight with an $84 price target.
According to the second quarter database of Insider Monkey, 44 hedge funds held stakes worth $1.92 billion in D.R. Horton, Inc. (NYSE:DHI), compared to 52 funds in the prior quarter worth $1.95 billion. John Armitage’s Egerton Capital Limited is the largest stakeholder of the company, with 7.6 million shares valued at $504 million.
Here is what Third Avenue Management specifically said about D.R. Horton, Inc. (NYSE:DHI) in its Q2 2022 investor letter:
“D.R. Horton, Inc. (NYSE:DHI) is the largest homebuilder in the US by volume (the company sold more than 90k homes in the past year) with a well-recognized focus on delivering quality product at the entry-level price point (its average selling price is less than $400k) and market-leading positions in key Sunbelt markets.
While the near-term outlook for DR Horton remains uncertain given the adjustments occurring in the US residential markets, the medium-to-long-term prospects for volume-based homebuilders with super-strong balance sheets and scale advantages continue to be promising in Fund Management’s view. More specifically, (i) residential inventories remain around record-low levels in most major markets when gauged by aggregate units available (see chart below), (ii) demand for single-family residences seem to have multiple secular drivers as the largest generation in US 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 (iii) significant inflation in rental rates for multi-family units in urban areas has left the rent-toown proposition for single-family homes in suburban areas in a compelling range (particularly in the Sunbelt region which is experiencing outsized job growth and wage growth relative to broader national figures).
In Fund Management’s view, the two industry participants that seem most likely to take part in this shift include DR Horton and Lennar Corp. (a long-held position in the Fund). In conjunction, these two “blue-chip builders” now account for approximately 10% of the Fund’s capital, as well as roughly one out of every five new homes built in the Sunbelt. They would also qualify under Third Avenue Founder Marty Whitman’s “Safe and Cheap” maxim as both companies are nearly “net-cash” (i.e., more cash than debt) with common stocks trading at less than five times trailing earnings, on average.”
