Scott Black Takes Stake in Lennar Corp.

Homebuilding company's sales have increased over past 3 years

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Mar 28, 2016
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Guru Scott Black (Trades, Portfolio) is a Portland, Maine native who has over 40 years of investment experience. Black graduated with from Johns Hopkins University in applied mathematics and economics. He later earned an MBA in finance at the Harvard Business School in 1971.

After his service in the U.S. Army, Black founded Delphi Management Inc. in 1980. Delphi Management Inc is an investment firm that focuses on a value-based strategy driven by bottom-up research. Delphi Management currently owns 100 stocks with a total value of $100 million.

In the fourth quarter of 2015, Black purchased 47,038 shares of Lennar Corp. (LEN, Financial).

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Lennar was founded in 1954 as a homebuilding company in Miami. Its homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which the company has investments.Â

Lennar has a market cap of $9.8 billion, a P/E ratio of 13.43, an enterprise value of $16.16 billion, a P/B ratio of 1.73 and a dividend yield of 0.35.

According to GuruFocus, Lennar has a 7/10 financial rating with one medium warning sign as the company is issuing new debt. Lennar has issued $2.1 billion of new debt over the previous three years. However, this debt is heavily invested in different real estate ventures.

Even though Lennar has been issuing new debt, the company’s CEO Stuart Miller knows and understands the value of land and real estate. The average sales price of a Lennar home was $344,000 in fiscal 2015, compared to $326,000 in fiscal 2014 and $290,000 in fiscal 2013. The average sales price has been increasing over the previous three years, which is a good sign for Lennar Corp.Â

Below is a Peter Lynch Chart for Lennar Corp.

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I believe that Black made a wise investment decision to purchase 47,038 shares of Lennar Corp. There is risk involved due to the fact that Lennar has incurred $5.4 billion of total debt within the business as of Nov. 30, 2015. However, the average sale for Lennar has been increasing over the past three years, and the company has been in existence since 1954. This gives it a significant edge of experience within the industry.

Cheers to your investment success.

Disclaimer: Author does not currently own any shares of this company.