Warren Buffett’s Berkshire builds $814mn stake in housebuilders

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Warren Buffett’s Berkshire Hathaway on Monday unveiled an $814mn investment in three US housebuilders, a bet on a sector that has benefited from dearth of supply.

Berkshire disclosed it had purchased 6mn shares of DR Horton, worth about $726mn at the end of the second quarter, as well as 152,572 shares in Lennar and 11,112 shares of NVR.

Shares of housebuilders and companies who service the industry have rallied this year after a difficult 2022 during which higher interest rates crimped demand.

However, while higher mortgage rates have cooled the pace of existing homes sales, new homes sales have remained surprisingly robust owing to the limited supply.

Berkshire already has a lot of exposure to the housing industry. It counts makers of flooring, paint, insulation, roofing and modular homes among its subsidiaries. Those businesses have not fared well so far this year, reporting a 12 per cent drop in revenues in the first half.

The purchase of DR Horton shares will make Berkshire one of the company’s ten largest shareholders with about 1.8 per cent of the stock.

It was unclear from the disclosure whether Buffett directed the purchases himself or if they were made by one of his two investment deputies, Todd Combs and Ted Weschler.

Analysts who follow Berkshire have generally perceived smaller stock purchases — those worth $1bn or less — to have been completed by Combs or Weschler.

The investments in the three stocks came in a relatively quiet period for Buffett, with the famed investor selling stock worth billions of dollars more than the shares he purchased.

He ploughed much of the proceeds into relatively high-yielding US Treasury bills, with the company’s cash pile sitting near a record at $147bn.

Berkshire also added to his positions in Capital One and oil producer Occidental Petroleum.

The investment in Capital One, one of the largest issuers of Visa and Mastercard credit cards in the US, may signal Berkshire’s comfort with the health of US consumers even as the economy slows. Berkshire increased its stake by more than 25 per cent and held $1.4bn of stock at the end of the quarter.

Berkshire also disclosed it had slashed its position in the video game maker Activision Blizzard, oil major Chevron, carmaker General Motors, industrials group Celanese and life insurer Globe Life.

Meanwhile, the group completely exited its investments in McKesson, the healthcare group, Marsh & McLennan, an insurer, and Vitese Energy.