In this article, we discuss the top 5 stock picks of billionaire George Soros. If you want to see more stocks in this selection, check out George Soros Stock Portfolio: Top 10 Stock Picks.
5. D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 44
Soros Fund Management’s Stake Value: $197,067,000
D.R. Horton, Inc. (NYSE:DHI) is a Texas-based homebuilding company that primarily constructs and sells single-family detached homes, townhomes, duplexes, and triplexes. The George Soros stock portfolio held nearly 3 million shares of D.R. Horton, Inc. (NYSE:DHI) in the second quarter of 2022, worth $197 million and representing 3.5% of the total 13F securities.
On October 21, Raymond James analyst Buck Horne downgraded D.R. Horton, Inc. (NYSE:DHI) to Outperform from Strong Buy with a price target of $77, down from $103. The downgrade reflects the analyst’s more cautious outlook on the housing market as mortgage rates have destroyed affordability. He remains constructive on D.R. Horton, Inc. (NYSE:DHI) in this environment as the industry’s most cost-efficient producer of single-family housing.
According to Insider Monkey’s data, 44 hedge funds were long D.R. Horton, Inc. (NYSE:DHI) at the end of June 2022, compared to 52 funds in the preceding quarter. John Armitage’s Egerton Capital Limited is the leading position holder in the company, with 7.6 million shares worth $504 million.
Here is what Third Avenue Management specifically said about D.R. Horton, Inc. (NYSE:DHI) in its Q2 2022 investor letter:
“D.R. Horton, Inc. (NYSE:DHI) is the largest homebuilder in the US by volume (the company sold more than 90k homes in the past year) with a well-recognized focus on delivering quality product at the entry-level price point (its average selling price is less than $400k) and market-leading positions in key Sunbelt markets.
While the near-term outlook for DR Horton remains uncertain given the adjustments occurring in the US residential markets, the medium-to-long-term prospects for volume-based homebuilders with super-strong balance sheets and scale advantages continue to be promising in Fund Management’s view. More specifically, (i) residential inventories remain around record-low levels in most major markets when gauged by aggregate units available (see chart below), (ii) demand for single-family residences seem to have multiple secular drivers as the largest generation in US history (the “millennial cohort”) enters its prime home buying years and desires more space not only due to “life events” but also “remote” and “hybrid” working arrangements, and (iii) significant inflation in rental rates for multi-family units in urban areas has left the rent-to-own proposition for single-family homes in suburban areas in a compelling range (particularly in the Sunbelt region which is experiencing outsized job growth and wage growth relative to broader national figures).
In Fund Management’s view, the two industry participants that seem most likely to take part in this shift include DR Horton and Lennar Corp. (a long-held position in the Fund). In conjunction, these two “blue-chip builders” now account for approximately 10% of the Fund’s capital, as well as roughly one out of every five new homes built in the Sunbelt. They would also qualify under Third Avenue Founder Marty Whitman’s “Safe and Cheap” maxim as both companies are nearly “net-cash” (i.e., more cash than debt) with common stocks trading at less than five times trailing earnings, on average.”
