Since early July, Berkshire Hathaway (NYSE: BRK.B) has nearly doubled its stake in Lennar (NYSE: LEN), America's second-largest homebuilder, ramping up its long-term bet on a recovery in the battered U.S. housing market.
As of late Friday, Berkshire reported holding close to 25.4 million LEN shares, along with another 549,000 super-voting Class B shares, for a total of 25.9 million shares currently worth $2.1 billion. That represents 10.9% of Lennar's roughly 238 million combined outstanding shares across both classes. According to the company's mid-August 13F portfolio snapshot filed with the U.S. Securities and Exchange Commission, Berkshire held 13.4 million shares as of June 30, meaning the current position is 93% larger.
Despite the size of the increase, it remains a small-to-mid-sized position by Berkshire's standards and is most likely the work of portfolio manager Ted Weschler. For most stocks in its portfolio, investors will have to wait until the next 13F filing in mid-November to learn whether Berkshire was buying or selling during the third quarter ended Wednesday. In this case, however, an SEC rule defines any holder with a stake of 10% or more as an "insider" who may be able to "change or influence company management and policies," so Berkshire was required to promptly disclose that its holdings reached 10% on September 21. The rule also requires any additional transactions to be disclosed within two business days.
On Monday, Berkshire reported buying $212.4 million of Lennar stock between September 17 and September 21. Another filing after Friday's closing bell disclosed an additional $136.4 million of purchases on Wednesday, Thursday and Friday. After the first filing was released the previous evening, Lennar shares rose as much as 6.8% intraday on Tuesday and held most of those gains over four days, climbing 5.2% cumulatively.
Berkshire's third-quarter buying came as the stock fell 9.2% through Friday's close. Year to date, the shares are down 20.1%. Last week, Lennar's quarterly earnings fell short of Wall Street expectations, with revenue declining 8%. Its guidance for the current quarter also disappointed, and the chief executive told analysts that housing affordability has worsened, with 30-year mortgage rates at 7% reducing the pool of qualified buyers.
CFRA Research analyst Cathy Seifert called it a "classic Berkshire value investment." She noted that Berkshire has a "fairly significant presence" in housing following CEO Greg Abel's June announcement of a $6.8 billion deal to acquire Taylor Morrison Home. He plans to merge that business with Berkshire's Clayton Homes. In an interview earlier this month, Abel said that while he doesn't see an "immediate recovery" for U.S. homebuilders, he expects Taylor Morrison to become a "very strong asset" in five to 10 years because "the American Dream will endure." The company's other housing and home-improvement subsidiaries include Shaw Industries, Johns Manville and Benjamin Moore.
Andrew Bary believes Berkshire "may want to buy all of Lennar" and has the capacity to absorb a cost of roughly $25 billion, but could run into the issue of Chairman and CEO Stuart Miller's 70% ownership of the company's controlling Class B shares. "One problem could be that the Miller family believes Lennar stock is undervalued — trading at less than half its 2024 high of nearly $200 and below book value — so they have no interest in selling even at a price above the current depressed level."