Warren Buffett-led Berkshire Hathaway disclosed late Monday that, during the second quarter, it bought three homebuilder stocks, including D.R. Horton, for the first time, while continuing to sell others. D.R. Horton stock advanced Tuesday, defying a broader market decline.
Warren Buffett Buys Homebuilder Stocks
In Q2, Berkshire opened stakes in D.R. Horton, Lennar and NVR worth a combined $814 million, its latest 13F filing on Monday showed.
D.R. Horton dominated the purchases. Buffett picked up nearly 6 million shares worth more than $726 million of that leading U.S. homebuilder. Horton is benefiting from robust home sales as high mortgage rates coax existing homeowners to hold tight to their low rate mortgages, driving sales to the new construction market.
But the housing market is showing signs of stress. On Tuesday, home improvement chain Home Depot beat earnings estimates. Sales fell 2% however, as rising interest rates throttled the refinance and home equity borrowing that fueled the big remodeling projects of the past few years.
Homebuilder sentiment in the market for new homes also dropped sharply in August with mortgage rates now above 7%, new data released on Tuesday showed.
Warren Buffett-led Berkshire already has exposure to the housing market through other companies it owns and controls.
Its homebuilding and remodeling businesses include Clayton Homes, Berkshire Hathaway HomeServices brokerage and Benjamin Moore paint.
As rising rates weighed on demand, those businesses posted lower Q2 earnings. Berkshire Hathaway warned of further declines over the rest of 2023.
But the Warren Buffett-led company also said those effects have been partly offset by new construction due to low supply of existing homes, which could benefit homebuilders.
For Berkshire, the purchases of homebuilder stocks were a relatively small investment at less than 0.25% of its total stock portfolio, which was worth $353.4 billion as of June 30.
Investors follow the moves in Berkshire's portfolio due to its strong returns over the long term. In addition, Buffett tends to have the company hold stocks for years or even decades, building core positions steadily over time.
So far this year, Berkshire Hathaway is a net seller of stocks. It sold a net $7.98 billion worth of stocks in Q2. In Q1, it sold a net $10.4 billion worth of stocks.
D.R. Horton stock rose 2.9% to 126.84 on the stock market today, near a 52-week high. DHI stock rebounded from the 50-day moving average.
Shares of Lennar and NVR also gained Tuesday amid a broad rally for homebuilder stocks. Stocks at large fell amid weak economic data out of China.
Other Top Berkshire Hathaway Buys, Sells
In Q2, Berkshire increased existing positions in Occidental Petroleum and Capital One Financial, after setting up an initial position in the latter during the first quarter.
Among other moves, the conglomerate continued to reduce its large existing stake in Chevron. Warren Buffett also pared Berkshire's position in General Motors, whose shift to electric vehicles is under scrutiny while traditional vehicles fuel strong earnings.
In addition, Berkshire exited three small positions, including McKesson, according to the latest Berkshire 13F data tracked by whalewisdom.com.
Besides Chevron and Occidental, Berkshire left the top 10 positions in its equity portfolio, including Apple and Bank of America, the top two, unchanged.
Still, Apple stock made up more than half (51%) of Berkshire's portfolio at the end of June, up from 46.4% at the end of March, as shares surged in value during the period.
