Baron Funds, an investment management company, released its “Baron Real Estate Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund declined 9.20% (Institutional Shares) in the second quarter compared to a 0.22% decline for the MSCI US REIT Index (the REIT Index) and a 4.03% decline for the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index). Some of the Fund’s top performers from 2023 and the first quarter of 2024 experienced declines, partly due to concerns about slowing growth. This includes the shares of homebuilders, residential building product and services companies, casino and gaming operators, certain REITs, and other real estate-related companies. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Real Estate Fund highlighted stocks like D.R. Horton, Inc. (NYSE:DHI) in the second quarter 2024 investor letter. D.R. Horton, Inc. (NYSE:DHI) is a homebuilding company headquartered in Arlington, Texas. The one-month return of D.R. Horton, Inc. (NYSE:DHI) was 4.36%, and its shares gained 56.99% of their value over the last 52 weeks. On August 29, 2024, D.R. Horton, Inc. (NYSE:DHI) stock closed at $186.85 per share with a market capitalization of $60.883 billion.
Baron Real Estate Fund stated the following regarding D.R. Horton, Inc. (NYSE:DHI) in its Q2 2024 investor letter:
“The shares of D.R. Horton, Inc. (NYSE:DHI) underperformed during the second quarter. D.R. Horton is the largest homebuilder in the U.S., with operations in 119 markets in 33 states, and a focus on more affordable price points (70% of homes closed are below $400,000).
Share prices of U.S. homebuilders more broadly were pressured over concerns that demand for new single-family homes would slow due to stretched consumer affordability (high prices, down payments and mortgage rates) and a rise in home resale inventory across several markets. D.R. Horton has been able to successfully weather these headwinds and continue to grow owing to its affordable price points, low-cost position, and scale advantages.
We remain enthusiastic about the multi-year prospects for D.R. Horton. Our view remains that the U.S. will need to build new homes at an elevated rate for the foreseeable future in order to replenish a current structural deficit of housing stock while also housing a growing population. We anticipate that D.R. Horton will continue to grow faster than the broader housing industry as the company leverages its scale advantages to gain market share across its footprint. Furthermore, we believe that as the company continues to transition its operations to a more asset-light business model that emphasizes returns and cash flow generation, the company’s valuation multiple may expand.”
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 31 Most Popular Stocks Among Hedge Funds. As per our database, 62 hedge fund portfolios held D.R. Horton, Inc. (NYSE:DHI) at the end of the second quarter which was 65 in the previous quarter. D.R. Horton, Inc.’s (NYSE:DHI) consolidated pre-tax income rose 1% to $1.8 billion in the second quarter, accompanied by a 2% growth in revenues to $10 billion. 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 Ariel Global Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 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.
