Warren Buffett is one of the most successful investors on Wall Street. The Berkshire Hathaway CEO is known for a long track record of market-beating returns, evident in the exemplary gains in Berkshire’s Class A shares since 1965. Over the past 57 years, the widely followed Berkshire Hathaway portfolio has generated returns of over 3.64 million percent. In other words, if you had invested $100 in Berkshire in 1965, that investment would be worth more than $3.64 million today. That works out to be an increase of around 20% compound annually, more than twice that of the S&P 500 over the same period. That stellar performance is why investors may want to take a page out of Buffett’s playbook and consider striking up a position in some Berkshire-held potential long-term winners themselves.
Today we’re sounding the alarm on one of Buffett’s recently disclosed additions to the Berkshire Hathaway portfolio. When you hear the logic behind this sizeable addition, you may want to pick up some shares too…
On Monday, Berkshire Hathaway disclosed a new investment in leading homebuilder NVR.
The investments were disclosed in a regulatory filing that detailed Berkshire’s U.S.-listed stock holdings, which comprise most of its $353.4 billion equity portfolio, as of June 30. The Q2 investment was made during a down period for homebuilders as rising interest and mortgage rates slowed demand. But Berkshire said those effects have been partially offset by new construction activity resulting from a low inventory of existing homes for sale, an environment that could benefit homebuilders. Berkshire said that as of June 30, it owned about 11,112 NVR shares worth $70.6 million.
Despite recent challenges, NVR has a strategic edge for long-term growth. The company’s mature market focus and careful lot acquisition approach form a robust base for resilience and expansion. By sourcing finished lots through Lot Purchase Agreements (LPAs), NVR mitigates land ownership risks and development costs. This not only reduces market vulnerabilities but also enhances inventory turnover, bolstering returns.
Beyond its established lot acquisition strategy, NVR is exploring alternatives, including joint ventures and direct land development, to capitalize on opportunities. Notably, NVR’s controlled properties under contract with landowners are poised to yield around 19.3k lots, highlighting its growth potential.
Perhaps Berkshire’s new stake is a bet that interest rates will fall and the home-buying frenzy will resume.
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