WHAT YOU NEED TO KNOW
  • Berkshire nearly doubled its Lennar stake to 25.9 million shares, valued at approximately $2.1 billion.
  • The position equals 10.9% of Lennar’s outstanding shares and represents a 93% increase from June 30.
  • Lennar shares are down 20.1% this year as affordability problems and 7% mortgage rates pressure housing demand.
  • Greg Abel expects no immediate homebuilding recovery but sees housing assets becoming stronger over five to 10 years.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Berkshire Hathaway has sharply expanded its wager on a long term recovery in the struggling United States housing market. The conglomerate nearly doubled its investment in Lennar, the nation’s second largest homebuilder, since the beginning of July.

As of late Friday, Berkshire reported owning almost 25.4 million Lennar shares and another 549,000 Class B super voting shares. Its combined position of 25.9 million shares was valued at approximately $2.1 billion.

The investment represents 10.9% of Lennar’s roughly 238 million outstanding shares across both classes. Berkshire owned 13.4 million shares as of June 30, according to its mid August SEC 13F portfolio filing covering the second quarter.

That means Berkshire increased its stake by 93%. Even after the aggressive round of purchasing, the Lennar holding remains a medium to small position by Berkshire’s standards and is likely the work of portfolio manager Ted Weschler.

MORE NEWS: Trump and Xi Seal Sweeping Tariff Breakthrough on $30 Billion in Goods

Investors ordinarily would need to wait until mid November for Berkshire’s next 13F filing to learn what the company bought or sold during its third quarter. Lennar became an exception after Berkshire’s ownership reached a key regulatory threshold.

Berkshire disclosed that its stake had reached 10% on September 21. Under an SEC rule, any holder at or above that level is considered an insider potentially able to “change or influence company management and policies.”

The designation also requires additional transactions to be disclosed within two business days. That requirement provided investors with a quicker look at Berkshire’s continued accumulation of Lennar stock.

On Monday, Berkshire reported purchasing Lennar shares valued at $212.4 million between September 17 and September 21. A separate filing released after Friday’s closing bell revealed another $136.4 million of purchases made Wednesday, Thursday, and Friday.

With the Federal Reserve expected to keep interest rates unchanged this month, do you think interest rates should remain where they are instead of being cut?

By completing the poll, you agree to receive emails from Gold Investors News, occasional offers from our partners and that you've read and agree to our privacy policy and legal statement.

The stock responded forcefully after the first disclosure. Lennar shares rose as much as 6.8% during Tuesday’s session and retained much of that advance, producing a four day gain of 5.2%.

Berkshire’s third quarter buying unfolded while Lennar’s shares were under pressure. Through Friday’s close, the stock had fallen 9.2% during the quarter and was down 20.1% for the year.

The weakness followed quarterly results that missed Wall Street’s forecast. Lennar’s revenue declined 8%, while the company’s outlook for the current quarter also disappointed investors.

Lennar’s CEO told analysts that homes have become less affordable and that fewer buyers qualify for financing as 30 year mortgage rates reach 7%. Those conditions have clouded the near term outlook for homebuilders and weighed on Lennar’s shares.

Close

MORE NEWS: Washington Millionaires Flee to Florida as Punitive Income Tax Looms

CFRA Research analyst Cathy Seifert described the investment as a “classic Berkshire value play.” She also noted that Berkshire already has a “pretty significant presence” in the housing industry.

That presence expanded through CEO Greg Abel’s $6.8 billion acquisition of Taylor Morrison Home, which was announced in June. Abel plans to combine that company’s operations with Berkshire’s Clayton Homes.

Earlier this month, Abel said during a CNBC interview that he does not see “any type of immediate recovery” for United States homebuilders. Still, he expects Taylor Morrison to become a “very strong asset” within five to 10 years because the “American dream will continue to exist.”

Berkshire also owns housing and home improvement subsidiaries including Shaw Industries, Johns Manville, and Benjamin Moore. The Lennar purchases add another sizable investment tied to the same troubled market.

At Barron’s, Andrew Bary suggested Berkshire “probably would like to buy all of Lennar.” He estimated that such a purchase could cost approximately $25 billion, an amount Berkshire could afford.

A potential obstacle is Chairman and CEO Stuart Miller’s 70% ownership of Lennar’s controlling Class B shares. Bary noted that the Miller family may view the stock as undervalued, given that it trades below book value and at less than half its 2024 high of almost $200.

Berkshire reported a market capitalization of $1,082,225,722,347. Its cash stood at $365.5 billion as of June 30, down 8.0% from March 31, while cash excluding railroad holdings and subtracting Treasury bill payables was $359.2 billion, down 3.8%.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.