We recently published a list of 10 Best Residential Construction Stocks to Buy. In this article, we are going to take a look at where D.R. Horton, Inc. (NYSE:DHI) stands against other best residential construction stocks to buy.
News from the US Residential Construction
On February 18, Reuters reported that the US homebuilder sentiment dropped to a five-month low in February. While new home construction is heavily dependent on imported materials such as lumber, there are concerns regarding tariffs on imports as well as higher mortgage rates further bringing housing costs higher. NAHB Chief Economist Robert Dietz reiterated the concerns, stating
“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs”
Sheryl Palmer, Taylor Morrison CEO, joined CNBC’s ‘Closing Bell Overtime’ to shed light on the housing market amidst weak builder confidence and slowing activity. According to her, the first-time buyer is still stretched. Regarding tariffs, she deemed the situation still uncertain but referred to them as something that will have an impact and will be ‘unfortunate’ since affordability is stretched and this certainly won’t help.
Previously, Ivy Zelman, Zelman and Associates Executive Vice President appeared on CNBC, saying the spring selling season is not yet a disaster but is off to a soft start. Alongside, the risk of inflation from tariffs and the deportation risk which is a concern for construction workers could put more inflation in labor is there. Simultaneously, builders do not have pricing power and hence, they are resorting to offering concessions.
Our Methodology
In order to compile a list of the 10 best residential construction stocks to buy, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best residential construction stocks to buy have been arranged in ascending order of their hedge fund holders, as of Q4 2024.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A construction site of a multi-family residential complex, a modern urban skyline in the background.
D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 60
D.R. Horton, Inc. (NYSE:DHI) is a Fortune 500 company that engages in the construction and sale of high-quality homes. The company started off with its first home in 1978 in Fort Worth and has closed over 1,100,000 homes in its 46-year history. Other than homebuilding, the company offers services such as mortgage, title, and insurance. DHI operates in 126 markets in 36 states across the country.
D.R. Horton, Inc. (NYSE:DHI) has a clear dominance in the American homebuilding market as it has been the largest homebuilder by volume since 2002. The homebuilder’s market share shows its strength, with approximately one out of seven new single-family homes in the United States built by DHI. As of September 30, 2024, D.R. Horton is the largest builder in 5 of the top 7 US housing markets and in 61 of the 125 markets in which it operated.
DHI has demonstrated a track record of consistent financial performance. The recent first fiscal quarter of 2025 is evidence, as the homebuilder achieved or exceeded guidance across all metrics. DHI recorded a consolidated pre-tax income of $1.1 billion alongside a pre-tax profit margin of 14.6%. This made it return $1.2 billion to shareholders through share repurchases and dividends during the quarter. Demographics supporting housing demand remain strong and continue to benefit the homebuilder.
Overall, DHI ranks 3rd on our list of best residential construction stocks to buy. While we acknowledge the potential of DHI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than DHI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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