Is NVR a Smart Investment Choice?

Ensemble Capital recently published its 2022 Q2 investor letter, a copy of which can be downloaded here. The fund lost nearly a third of its value this year and trails the S&P 500 Index. However, it posted positive annualized returns of 7% and 10% respectively over the last 3 and 5 years. To have a glimpse of its finest picks for 2022, check out the top 5 holdings of the fund.

One of the main reasons for Ensemble’s poor 2022 performance is the underperformance of housing stocks this year like NVR, Inc. (NYSE:NVR). NVR, Inc. (NYSE:NVR) is a leading home building company based in the United States with a market capitalization of $14.4 billion. The one-month return of NVR, Inc. (NYSE:NVR) is 12.42% while its 12-month returns decreased to -11.26%. NVR, Inc. (NYSE:NVR) had a closing price of $4,552.61 on July 22, 2022. The group of housing stocks in Ensemble’s portfolio declined an average of 32% this year and contributed 5 percentage points to the fund’s -33% return this year. The demand for housing loans is impacted by the accelerated Fed rate hikes.

Here is what the fund specifically said about NVR, Inc. (NYSE:NVR):

“Home builder NVR trades at a PE ratio of 8, or less than half its valuation in the years prior to COVID. Yet, while we fully expect housing demand to slow sharply in the near term, we have no doubt that America needs to build a huge number of new homes in the years ahead if we are ever going to build our way out of the housing shortage that has pushed up the cost of living. NVR’s unique business model helps protect it during periods of declining home prices, which is why the stock outperformed other home builders by so much during the Financial Crisis. The company also believes their stock trades at a low valuation, as illustrated by them buying back 5% of their shares outstanding in the first quarter of this year.”

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Our calculations show that NVR, Inc. (NYSE:NVR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. NVR, Inc. (NYSE:NVR) was in 39 hedge fund portfolios at the end of the first quarter of 2022, compared to 35 in the previous quarter. NVR, Inc. (NYSE:NVR)  shares lost 13% of their value over the last 52 weeks.

Recently we published another investor letter article from another hedge fund in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.