5 Best Housing Stocks To Buy According to Hedge Funds

In this article, we discuss the 5 best housing stocks to buy according to hedge funds. To read the detailed analysis of the housing market, go directly to the 14 Best Housing Stocks To Buy According to Hedge Funds.

5. NVR, Inc. (NYSE:NVR)

Number of Hedge Fund Holders: 44

NVR, Inc. (NYSE:NVR) is a homebuilding company that constructs and sells different types of residential properties and provides mortgage-related services through its Homebuilding and Mortgage Banking segments. The company is one of the best housing stocks to buy according to hedge funds.

On April 23, NVR, Inc. (NYSE:NVR) announced its first-quarter earnings. The Q1 GAAP EPS was $116.41 and surpassed the estimates of $10.3.97. In the quarter, revenue reported was $2.33 billion, growing 6.9% year-over-year and beating the estimates of $2.22 billion.

44 hedge funds had stakes in NVR, Inc. (NYSE:NVR), with total positions worth $871.919 million in the fourth quarter of 2023. With 86.118 million shares worth $602.86 million, Diamond Hill Capital is the most dominant shareholder in the company, as of December 31, 2023.

Artisan Partners commented on NVR, Inc. (NYSE:NVR) in its first quarter 2024 investor letter:

“Notable adds in the quarter included Xylem, NVR, Inc. (NYSE:NVR) and Equifax. NVR is a highly productive, build-to-order homebuilder with a land-light strategy that operates in the mid-Atlantic, Northeast, Southeast and Midwest regions. The company uses land options rather than land purchases in its lot development, meaning it can simply focus on building homes and walk away from lots should the environment change (which has proven to be an effective risk management approach over time). The housing cycle continues to be favorable for homebuilders from both a supply and demand perspective. Demographic trends (household formation) support demand while supply is constrained due to a low rate of housing starts and depressed existing home sales (since many existing homes are financed with below-market interest rates). We added to the position on signs of homebuilder orders accelerating.”

4. Toll Brothers, Inc. (NYSE:TOL)

Number of Hedge Fund Holders: 49

Toll Brothers, Inc. (NYSE:TOL) is engaged in the designing, building, marketing, selling, and arranging finance for various types of detached and attached homes in the U.S. Toll Brothers, Inc. (NYSE:TOL) was held by 49 hedge funds in the fourth quarter of 2023 and the stakes amounted to $1.24 billion. Greenhaven Associates is the top shareholder of the company and has a position worth $569.969 million, as of December 31, 2023.

Toll Brothers, Inc. (NYSE:TOL) has a consensus Buy rating among 7 analysts, and its average price target of $128.70 represents an upside of 6.15% from current levels, as of May 2.

3. Zillow Group, Inc. (NASDAQ:Z)

Number of Hedge Fund Holders: 65

Zillow Group, Inc. (NASDAQ:Z) operates in the real estate industry through its real estate brands in mobile applications and websites, including Zillow Premier Agent, Zillow Home Loans, and Zillow Rentals, among others.

Based on 3 Wall Street analysts’ ratings in the last three months, Zillow Group, Inc. (NASDAQ:Z) has a consensus rating of Moderate Buy. The average price target of $62.50 represents an upside of 56.88% from the last price of $39.84, as of May 2.

Zillow Group, Inc. (NASDAQ:Z) is among the best housing stocks to buy according to hedge funds. In the fourth quarter of 2023, 65 hedge funds had stakes in Zillow Group, Inc. (NASDAQ:Z), with total positions worth $1.076 billion. Dorsal Capital Management is the most significant shareholder in the company with a position worth $176.473 million, as of Q4 of 2023.

2. Lennar Corporation (NYSE:LEN)

Number of Hedge Fund Holders: 65

Lennar Corporation (NYSE:LEN) is engaged in the acquisition, development, construction, and sale of different types of residential properties and land. It operates through various segments, including Homebuilding East, Homebuilding Central, and Homebuilding Texas, among others. At a stake value of $3.93 billion, 65 hedge funds held positions in Lennar Corporation (NYSE:LEN). As of December 31, 2023, Greenhaven Associates is the top shareholder in the company and has a position worth $1.3 billion.

On April 10, Lennar Corporation (NYSE:LEN) declared a quarterly dividend of $0.50, payable by May 8 to the shareholders of record on April 24. The stock has a dividend yield of 1.29%, as of May 2.

Baron Real Estate Fund stated the following regarding Lennar Corporation (NYSE:LEN) in its first quarter 2024 investor letter:

“Following exceptional performance in 2023, the share prices of our investments in homebuilder companies – Toll Brothers, Inc., Lennar Corporation (NYSE:LEN), and D.R. Horton, Inc. – continued to move higher in the first quarter of 2024, gaining 26.1%, 15.8%, and 8.5%, respectively, in part due to the continuation of strong quarterly business results and management optimism about each company’s multi-year prospects. Our recent meetings with CEOs Doug Yearley (Toll Brothers), Stuart Miller (Lennar), and Paul Romanowski (D.R. Horton), reinforced our view that each company is well positioned to generate strong long-term shareholder returns.

In January, we met with Lennar’s senior management team, including CEO Stuart Miller, at the company’s headquarters in Miami. We also had follow-up discussions with management over the course of the first quarter.

We are bullish on the long-term prospects for Lennar. We believe the company is exceptionally well run, favorably positioned to generate compelling long-term growth, and committed to unlocking shareholder value through several strategic initiatives…” (Click here to read the full text)

1. D.R. Horton, Inc. (NYSE:DHI)

Number of Hedge Fund Holders: 67

D.R. Horton, Inc. (NYSE:DHI) is a homebuilding company that acquires and develops land, and it also builds and sells residential homes. The company operates through D.R. Horton, Emerald Homes, Express Homes, and Freedom Homes brands and tops our list of the best housing stocks to buy according to hedge funds.

On April 18, D.R. Horton, Inc. (NYSE:DHI) announced a quarterly dividend of $0.30, payable by May 9 to the shareholders of record on May 2. As of May 2, the stock’s dividend yield is 0.82%.

D.R. Horton, Inc. (NYSE:DHI) was part of 67 hedge funds’ portfolios in the fourth quarter of 2023 with a total stake value of $3.76 billion. GQG Partners is the most prominent shareholder in the company and has a position worth $572.709 million as of Q4 of 2023.

Baron Funds stated the following regarding D.R. Horton, Inc. (NYSE:DHI) in its fourth quarter 2023 investor letter:

“The share prices of our investments in homebuilder companies – Toll Brothers, Inc., D.R. Horton, Inc. (NYSE:DHI), Inc., and Lennar Corporation – gained 39.4%, 41.8%, and 33.2%, respectively, in the most recent quarter, in part due to the continuation of strong quarterly business results, management optimism about 2024 prospects, and a more than 100 basis point decline in 30-year mortgage rates during the quarter.

2023 was an excellent year for the public homebuilders. Housing fundamentals were resilient despite the affordability challenges of elevated mortgage rates and home prices. Several years of pent-up demand, fears that mortgage rates could move higher, a dearth of inventory in the existing home market, and an overall housing supply shortage drove home buyers off the sidelines to “stretch their wallet,” in part due to fears that they could miss out on the opportunity to buy a home. The Fund’s homebuilding companies Toll Brothers, D.R. Horton, and Lennar increased 108.0%, 71.4%, and 66.3%, respectively, in 2023.

Though we anticipate more modest gains for the Fund’s homebuilder investments in 2024, we remain optimistic about the long-term prospects for Toll Brothers, D.R. Horton, and Lennar. Further, we continue to believe there is a compelling case for the homebuilder valuations to re-rate higher over time.

Since the beginning of 2020, D.R. Horton, Lennar, and Toll Brothers have demonstrated substantial resilience and operating prowess. Despite several black swan events – COVID-19, a sharp increase in mortgage rates from 3% to 8%, and supply-chain disruptions – each company has managed its business exceptionally well and demonstrated that the demand to buy homes is resilient.”

Should you invest $1,000 in D.R. Horton, Inc. (NYSE:DHI) right now?

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Disclosure: None. You can also look at the 35 Most Dangerous Cities in the World and the 10 Best Trucking Stocks to Buy.

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