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By Giulia Carbonaro
Senior Reporter
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Warren Buffett, one of the most successful investors of all time, walked back on the bet he had made on the U.S. housing market last year, selling off recently bought stocks in major U.S. homebuilders.
In August 2023, Buffett's company Berkshire Hathaway informed the U.S. Securities and Exchange Commission (SEC) that it had invested in D.R. Horton, Lennar and NVR in the quarter ending June 30. The firm bought respectively 5,969,714, 152,572 and 11,112 shares of each company. These were reportedly worth over $800 million together, with the investment in D.R. Horton—considered the largest homebuilder in the country—alone accounting for more than $700 million of that entire sum.
Home supplies have remained historically low across the country in the past few years. This has contributed to keep prices up, even when demand dropped modestly during the housing market correction of late summer 2022 to spring 2023. Berkshire Hathaway's move suggested that Buffett, known as the Oracle of Omaha, was betting on the long-term inventory shortage in the U.S. housing market to drive up these companies' stocks.
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However, in February, Buffett's company disclosed to the SEC that it had already sold off all of its 5,969,714 shares of D. R. Horton in the quarter ending on December 31, 2023, as reported by Lance Lambert on ResiClub. The journalist said: "It's interesting that Warren Buffett would so quickly sell off his D.R. Horton stake and exit the homebuilder bet." Newsweek contacted D.R. Horton and Lambert for comment by email early on Tuesday morning.
Lambert then quoted Buffett's 1996 letter to shareholders, where the investor mentioned that, "if you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."
While Buffett hardly ever reveals his reasons behind major investments, Berkshire Hathaway is sure to have profited enormously from its investment in D.R. Horton, after the company's share price went up by 70.5 percent last year. Share prices for the other two homebuilders, Lennar and NVR, also went up by respectively 64.7 and 51.8 percent.
It's possible that Buffett has changed his investment credo since 1996. In this year's annual letter to shareholders, he told investors that Berkshire Hathaway is no longer likely to deliver the skyrocketing performances it has been known for in the past.
"Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital. Anything beyond 'slightly better,' though, is wishful thinking," Buffett wrote in the letter.
Buffett mentioned a lack of investment opportunities, especially outside the U.S., for Berkshire to replicate its past successes.
His caution is hardly reflected by Berkshire's recent record-breaking results. In the company's latest annual report, Berkshire Hathaway reported that its operating earnings rose to $37.3 billion in 2023. This was a record for the company whose market valuation is now nearing $1 trillion. It has hoarded $167.6 billion in cash and equivalent, according to its Q4 2023 earnings.
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