Baron Funds, an investment management company, released its “Baron Real Estate Fund” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund increased 12.46% (Institutional Shares) in the full year compared to a 7.49% return for the MSCI US REIT Index (the REIT Index) and a 12.70% return for the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index). The fund decreased 2.98% in the fourth quarter, outperforming 6.39% and 4.69% declines for the indexes for the same period. In addition, please check the fund’s top five holdings to know its best picks in 2024.
In its fourth quarter 2024 investor letter, Baron Real Estate Fund emphasized stocks such as D.R. Horton, Inc. (NYSE:DHI). D.R. Horton, Inc. (NYSE:DHI) is a homebuilding company. The one-month return of D.R. Horton, Inc. (NYSE:DHI) was -13.36%, and its shares lost 15.39% of their value over the last 52 weeks. On February 27, 2025, D.R. Horton, Inc. (NYSE:DHI) stock closed at $126.44 per share with a market capitalization of $40.566 billion.
Baron Real Estate Fund stated the following regarding D.R. Horton, Inc. (NYSE:DHI) in its Q4 2024 investor letter:
“As noted earlier in this letter, we chose to decrease the Fund’s homebuilder exposure in D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation, and Toll Brothers, Inc. in the most recent quarter following exceptional share price performance over the prior two years. From September 30, 2022, through September 30, 2024, shares of Toll Brothers, Lennar, and D.R. Horton increased 269%, 155%, and 184%, respectively. Homebuilder valuations for our investments had approached near peak valuations from prior cycles (at or above 2 times tangible book value). We also have concerns that the recent 100 basis point increase in interest rates will further crimp housing affordability. This could lead to flattening home prices and elevated homebuilder incentives to entice buyers to purchase a home. Further, the new administration policy decisions around tariffs, immigration, and deportation may increase the cost for labor and materials. The issues cited above may lead to pressure on homebuilder gross margins in 2025.
The shares of several homebuilders and residential-related building product/ services companies foreshadowed some of these concerns in the fourth quarter and valuations are becoming more compelling. We are monitoring developments closely and may look to acquire additional shares in 2025…” (Click here to read the full text)
A construction site of a multi-family residential complex, a modern urban skyline in the background.
D.R. Horton, Inc. (NYSE:DHI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 60 hedge fund portfolios held D.R. Horton, Inc. (NYSE:DHI) at the end of the fourth quarter compared to 69 in the third quarter. D.R. Horton, Inc.’s (NYSE:DHI) earnings for the first quarter of fiscal 2025 declined by 7%, totaling $2.61 per diluted share, compared to $2.82 per share during the same quarter last year. While we acknowledge the potential of D.R. Horton, Inc. (NYSE:DHI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed D.R. Horton, Inc. (NYSE:DHI) and shared the list of best residential construction stocks to buy. In addition, please check out our hedge fund investor letters Q4 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.