Keep an eye on 13F filings.
Filed quarterly by all institutional investment managers with at least $100 million in assets, these are a great way to see where the big money has been flowing. Unfortunately, it’s also a look into the past, with 13Fs filings not required until 45 days after the end of a quarter.
Still, keep an eye on them. Oftentimes, a 13F will give investors a glimpse into the thinking of institutions. For example, we just learned that Warren Buffett’s Berkshire Hathaway invested millions in homebuilding stocks. That included a $275 million investment in DR Horton (DHI), a $17 million investment in Lennar (LEN), and a $70 million investment in NVR Inc. (NVR).
While we don’t know the exact reasons for the buys – Berkshire won’t disclose – we can only speculate that even with higher mortgage rates, Berkshire believes builders are still capitalizing on limited housing supply. Even Deutsche Bank says the shortages will keep builders busy.
“We quickly turned from being cautiously optimistic to decisively bullish on new residential construction,” said Deutsche Bank, as quoted by Fortune. “We expect solid demand for new housing to accompany a continuing normalization of margins and returns, and as book values grow, the stocks should generally move higher, but we see opportunity for stock selection.”
Also, “It is hard to pinpoint exactly how underbuilt the country is, but I firmly believe we are still in an extremely undersupplied housing market, for both new and existing homes, likely for years to come due to development and construction capacity constraints in the industry,” D.R. Horton CEO David Auld told Fortune.
As a result, homebuilder stocks could see higher highs.
DR Horton (DHI) ran from about $97 to $127 since April. Pulte (PHM) ran from $57.50 to $84.35. Toll Brothers (TOL) ran from $58 to $81.44. KB Home (KBH) jumped from $38 to $53.90, as Lennar (LEN) raced from $100 to $126.28 a share.
All could see higher highs with Buffett on board, and with housing shortages.
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