U.S. market indexes traded higher on Tuesday morning after Treasury Secretary Janet Yellen assured investors the banking crisis will be contained.
The Dow Jones Industrial Average and S&P 500 both rose 0.60%, while the Nasdaq Composite increased 0.40%.
Further, the National Association of Realtors reported sales of previously owned homes gained 14.5% in February compared to the previous month. This marked the first monthly gain in a year and the largest increase since July 2020.
Higher mortgage rates have impacted home prices since last summer. Last month, home prices were lower year over year for the first time in 131 months.
Despite these trends, homebuilding and construction stocks have returned 20.76% year to date.
While volatility persists due to high inflation, rising interest rates and now a banking panic, gurus are still finding value opportunities among consumer cyclical companies as their products are always in demand regardless of economic conditions. According to GuruFocus’ Hot Picks, a Premium feature based on 13F filings, the homebuilding companies most-bought by gurus during fourth-quarter 2022 included Lennar Corp. (LEN, Financial), D.R. Horton Inc. (DHI, Financial), KB Home (KBH, Financial), Cavco Industries Inc. (CVCO, Financial) and NVR Inc. (NVR, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Lennar
Held by 13 gurus with a combined equity portfolio weight of 12.45%, eight buys and five sells were recorded for Lennar (LEN, Financial) in the fourth quarter.
The Miami-based homebuilder, which targets first-time, move-up and active homebuyers, has a $29.41 billion market cap; its shares were trading around $104.11 on Tuesday with a price-earnings ratio of 6.45, a price-book ratio of 1.23 and a price-sales ratio of 0.89.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 94 out of 100, the GF Score indicates the company has high outperformance potential on the back of solid ratings for profitability, growth, financial strength and momentum. The GF Value rank was more moderate.
Of the gurus invested in Lennar, the Smead Value Fund (Trades, Portfolio) has the largest stake with 0.86% of its outstanding shares. Glenn Greenberg (Trades, Portfolio), Ron Baron (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) are other notable shareholders.
D.R. Horton
Recording eight buys and seven sells for the fourth quarter, 16 gurus are invested in D.R. Horton (DHI, Financial). The combined weight in their equity portfolios is 17.85%.
The home construction company headquartered in Arlington, Texas has a market cap of $33.49 billion; its shares were trading around $97.52 on Tuesdaywith a price-earnings ratio of 6.05, a price-book ratio of 1.66 and a price-sales ratio of 1.03.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 97 implies the company has high outperformance potential, driven by solid ratings for four of the categories and middling marks for GF Value.
With a 0.70% stake, the Smead Value Fund (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors of D.R. Horton include First Eagle Investment (Trades, Portfolio), Greenberg and the Parnassus Endeavor Fund.
KB Home
KB Home (KBH, Financial), which recorded seven buys and three sells for the fourth quarter, is held by 11 gurus with a combined equity portfolio weight of 1.48%.
The Los Angeles-based home building company has a $2.99 billion market cap; its shares were trading around $36.44 on Tuesday with a price-earnings ratio of 4, a price-book ratio of 0.84 and a price-sales ratio of 0.48.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
With a GF Score of 91, the company has high outperformance potential due to solid ranks for four of the criteria and a more moderate financial strength rating.
Ken Fisher (Trades, Portfolio) is KB Home’s largest guru shareholder with a 3.37% stake. The stock is also being held by Howard Marks (Trades, Portfolio), Donald Smith & Co., Keeley-Teton Advisors, LLC (Trades, Portfolio), Hotchkis & Wiley and Druckenmiller, among others.
Cavco Industries
With six buys and two sells for the quarter, Cavco Industries (CVCO, Financial) is held by eight gurus. They have a combined equity portfolio weight of 1.61% in the stock.
The producer of manufactured and modular homes, which is headquartered in Phoenix, has a market cap of $2.57 billion; its shares were trading around $296.06 on Tuesday with a price-earnings ratio of 10.83, a price-book ratio of 2.72 and a price-sales ratio of 1.24.
The GF Value Line suggests the stock is modestly undervalued currently.
The GF Score of 98 means the company has high outperformance potential, having received robust ratings across the board.
Holding 2.53% of Cavco’s outstanding shares, Mario Gabelli (Trades, Portfolio) has the largest position. Fisher, Chuck Royce (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and several other gurus also own the stock.
NVR
NVR (NVR, Financial), which is held by 11 gurus, recorded an equal number of six buys and sells for the three-month period. Their combined equity portfolio weight is 9.35%.
The Reston, Virginia-based company, which builds single-family homes as well as town homes and condominiums, has a $17.82 billion market cap; its shares were trading around $5,486.90 on Tuesday with a price-earnings ratio of 11.15, a price-book ratio of 5.04 and a price-sales ratio of 1.83.
According to the GF Value Line, the stock is modestly undervalued currently.
Driven by high ratings for growth, profitability, financial strength and momentum as well as a moderate GF Value rank, the company’s GF Score is 98. As such, NVR has high outperformance potential.
NVR’s largest guru shareholder is Diamond Hill Capital (Trades, Portfolio), which has 3.59% of its outstanding shares. Other top guru investors include the Smead Value Fund (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Simons’ firm, Steven Cohen (Trades, Portfolio) and Grantham.
Other popular picks
Additional stocks that were popular with gurus during the fourth quarter included Toll Brothers Inc. (TOL, Financial), Tri Pointe Homes Inc. (TPH, Financial), Century Communities Inc. (CCS, Financial), Installed Building Products Inc. (IBP, Financial) and Skyline Champion Corp. (SKY, Financial).
