While Buffet Might Be Out On D.R. Horton, There Is A Lot To Like About The Nation’s Largest Homebuilder

Warren Buffet’s Berkshire Hathaway unloaded just under 6 million shares of D.R. Horton at the end of 2023, but that hasn’t changed many leading analysts from viewing the nation’s largest homebuilder as a solid long-term investment.

Berkshire Hathaway’s decision has puzzled many who see tremendous upside in the homebuilding market. Some hypothesize the move was due to short-term risks associated with the health of the broader economy, while others think homebuilder stocks might have a hard time repeating their blazing 2023 success. 

D.R. Horton CEO Paul Romanowski alluded to several themes during the 2024 Global Industrial Tech and Mobility Conference that reiterate the firm’s dominance in the industry. The company is aiming for a 24-month cash back and a minimum 20% return while simplifying business processes and improving efficiency are top priorities. Romanowski also referenced the increasing difficulties around lot development due to government entitlements and approvals.

During the conference, Romanowski also suggested the company is already seeing strong performance this spring thanks to its strong foundation and comprehensive understanding of market dynamics.

Regardless of whether Buffet is onboard, it’s looking like D.R. Horton’s dominance of the market is set to continue this year, and this is because the homebuilder continues to set itself apart in the market by way of the following strategies:

  • Eliminating Affordability Challenges For Buyers
    Housing affordability continues to plague much of the market, but D.R. Horton is knocking down the barrier to homeownership by offering popular incentives like mortgage buy-downs and closing cost discounts at a time when consumers need it the most.
  • A Focus On Building Communities, Not Just Homes
    Horton’s approach to homebuilding is highly strategic with a focus on establishing a community foundation instead of primarily focusing on rapid growth. This leads to faster build-cycle times and also helps support a strong longer term sales outlook.
  • Balancing Land Costs
    Land costs are at an all-time high, but D.R. Horton has been able to navigate this challenge by balancing costs and value. They’re quick to identify land with value potential but are also cautious not to sink too much into land acquisition.
  • Defeating The Competition
    Because of its scale and operational efficiencies, D.R. Horton has been able to outplay the competition through a combination of sound strategy, outbidding, and brand strength. The firm is committed to continuously growing its market share, and they’ve done so successfully for many years.
  • Strategic Acquisitions
    Whether it’s a cost-effective way to grow lot supply or an opportunity to enhance operational efficiencies, D.R. Holton is and will continue to be very strategic when it comes to M&A opportunities. They are patient, disciplined, and ready to act when the right opportunities emerge.
  • Efficient Build Cycles
    Homebuilding profitability lives and dies by cycle times, and nobody knows this as well as D.R. Horton. The firm is on an ongoing mission to shorten home building production, and they have already reduced the cycle to approximately four months.
  • Managing Risk And Regulatory Requirements
    Regulatory requirements can slow down many homebuilders, but D.R. Horton has developed the ability to navigate these with efficiency by taking a proactive approach to these roadblocks. They’re able to adhere to both federal regulations and local laws without sacrificing build times.

D.R. Horton is doing more than just building homes. They’re developing strong communities, improving affordability challenges, and executing their business plan with a high degree of operational efficiency. They’re doing all of this during a time when market dynamics are creating significant headwinds for the industry. They’re serving their customers well and earning a strong reputation as America’s largest homebuilder. They have a pivotal role to play in how the real estate market evolves over the next several years.

While Berkshire might be out on D.R. Horton and the market will continue to create hurdles, D.R. Horton’s business is strong and there is a lot to like about their long-term outlook.