Is it a Wise Decision to Acquire NVR Shares?

Motiwala Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be seen here. In 2021, the fund’s core US capital appreciation gained +26.5% net of fees. US markets continued their winning ways with the S&P 500 index returning 28.7%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Motiwala Capital, in its Q4 2021 investor letter, mentioned NVR, Inc. (NYSE:NVR) and discussed its stance on the firm. Founded in 1980, NVR, Inc. (NYSE:NVR) is a Reston, Virginia-based home construction company with a $14.7 billion market capitalization, and is currently spearheaded by its CEO, Paul C. Saville. NVR, Inc. (NYSE:NVR) delivered a -25.69% return since the beginning of the year, while its 12-month returns are down by -8.07%. The stock closed at $4,390.86 per share on April 05, 2022.

Here is what Motiwala Capital has to say about NVR, Inc. (NYSE:NVR) in its Q4 2021 investor letter:

“NVR Inc (NYSE:NVR) is a home builder with half of its revenues in the Washington D.C and Baltimore metro areas. NVR was among the first home builders to move to an asset-light business model wherein the company does not purchase too much land ahead of sales. It uses options that give it the right to purchase land in the future to construct homes. The company requires less capital to run the business and as a result, generates one of the best returns on equity in the industry (over 25%). NVR has used ample free cash flow to repurchase shares over the decade. We purchased shares at about ~13x 2021 earnings of $320/ share. Note, the high share price of $4000 does not indicate it is expensive, just like a $2 share price does not mean it is cheap. What we look at is the earnings per share (EPS or E) and compare that to the share price (and many other aspects). In this case, the share price was $4000 (P) and the EPS (E) is expected to be $320 for a P/E of 12.5. With the booming demand for homes in the US and limited supply, we think the housing industry and this company should do well. Even though this is cyclical, it is a higher quality company in this cyclical industry with a solid balance sheet.”

Our calculations show that NVR, Inc. (NYSE:NVR) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. NVR, Inc. (NYSE:NVR) was in 35 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 32 funds in the previous quarter. NVR, Inc. (NYSE:NVR) delivered a -23.36% return in the past 3 months.

In January 2022, we also shared another hedge fund’s views on NVR, Inc. (NYSE:NVR) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.