We recently published a list of 12 Worst Depressed Stocks To Buy Now. In this article, we are going to take a look at where D.R. Horton, Inc. (NYSE:DHI) stands against other worst depressed stocks to buy now.
Will the “Fed Put” Come into Play?
With the recent pressure on the equity market from tariffs the market has been wondering if the Fed Put will come into play. On March 20, Mike Wilson, Morgan Stanley CIO, and Chief U.S. equity strategist, joined CNBC to discuss the likelihood of interest rate cuts during the year and the overall market outlook. Morgan Stanley expects the year 2025 to have only a single rate cut, however, if the market slows down more than expected then the Fed Put will come into play with another rate cut. Wilson noted that the Fed is going to respond to lower growth, however, the question that remains unanswered is how will the Fed measure this growth. According to Wilson, the labor market is one of the indicators that the reserve is watching closely. Currently, most of the weakness in the labor market is in the government sector as the government is trying to shrink the sector. Wilson noted that if this move spills over to the private sector then there is no doubt that the Fed will respond to that with another rate cut.
Wilson further elaborated that investors are not concerned about the next 12 months, rather they are more curious to know the current market situation. He noted that Morgan Stanley’s view of the market coming into 2025 was that the first half would be tougher due to the high expectations and the government sequencing its policies. One other reason behind this was that market expectations were too high whereas the reality was somewhat different. Wilson noted that we entered this year when the Fed was cutting rates and the valuations were high, so the current market slowdowns are partly due to the much-needed market correction as well. He also noted that there is a growth deceleration going on with the AI capital expenditure as well, which Wilson believes is good as now the expectations are more aligned with reality. He elaborated that these are the reasons why the firm believes that the 5,500 for the S&P 500 is a good level.
Looking ahead to the second half of the year, Wilson acknowledged potential tailwinds from growth-positive policy changes like tax cuts, deregulation, and lower yields. However, he argued that these are too distant for markets to price in currently. He also emphasized that while a “Trump put” may not exist, the “Fed put” remains active but would likely require worsening conditions in labor markets or credit and funding markets, scenarios that would initially be negative for equities.
Our Methodology
To curate the list of 12 worst depressed stocks to buy now we used the Finviz stock screener, Yahoo Finance, and CNN. Using the screener we aggregated a list of stocks that have fallen more than 15% over the past 12 months and are currently trading within 0% to 3% of their 52-week lows. Next, from this aggregated list we shortlisted stocks with more than 20% analyst upside potential. Lastly, we ranked the stocks in descending order of the number of hedge funds that have stakes in them (from best to worst), as of Q4 2024. Please note that the data was recorded on March 19, 2025.
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)
52 Week Range: 124.23 – 199.85
Current Share Price: $126.78
Analyst Upside Potential: 32.51%
1-Year Performance: -15.62%
Number of Hedge Fund Holders: 60
D.R. Horton, Inc. (NYSE:DHI) is one of America’s largest homebuilders by volume. It operates in 121 markets across 33 states. The company engages in constructing and selling a diverse range of high-quality homes, with prices generally ranging from $200,000 to over $1,000,000. Moreover, the company is also involved in national residential lot development through its majority-owned subsidiary, Forestar Group Inc.
During the fiscal first quarter of 2025, the company faced slightly lower net sales orders compared to the last year. However, the company maintained its demand by focusing on affordability through smaller floor plans and incentives such as mortgage rate buy-downs. As a result, D.R. Horton, Inc. (NYSE:DHI) achieved earnings of $2.61 per diluted share, with consolidated pre-tax income of $1.1 billion on revenues of $7.6 billion, resulting in a pre-tax profit margin of 14.6%.
Parnassus Core Equity Fund mentioned the company in its Q4 2024 investor letter, stating that the company’s shares dropped due to the higher mortgage rates, which led to a slower housing market and negative investor sentiment towards the industry. Moreover, the expectations of continued high interest rates during the quarter have further worsened investor confidence, highlighting affordability challenges and a potential slowdown in homebuyer activity. The stock is currently trading close to its 52-week low, thereby making it one of the worst depressed stocks to buy now.
Parnassus Core Equity Fund stated the following regarding D.R. Horton, Inc. (NYSE:DHI) in its Q4 2024 investor letter:
“D.R. Horton, Inc. (NYSE:DHI), the nation’s largest homebuilder, saw its shares decline as the market for new homes slowed against a backdrop of higher mortgage rates. As expectations for continued higher interest rates flared late in the quarter, investor sentiment on the housing sector worsened.”
Overall, DHI ranks 9th on our list of worst depressed stocks to buy now. While we acknowledge the potential of 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 time frame. If you are looking for an 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
