Third Avenue Management, an investment management firm, published its “Real Estate Value Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of the calendar year, the Fund generated a return of -7.40% (after fees) versus -3.79% (before fees) for the Fund’s most relevant benchmark, the FTSE EPRA NAREIT Developed Index. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Third Avenue Management Real Estate Value Fund mentioned D.R. Horton, Inc. (NYSE:DHI) and explained its insights for the company. Founded in 1978, D.R. Horton, Inc. (NYSE:DHI) is an Arlington, Texas-based home construction company with a $25.5 billion market capitalization. D.R. Horton, Inc. (NYSE:DHI) delivered a -35.37% return since the beginning of the year, while its 12-month returns are down by -30.93%. The stock closed at $70.09 per share on April 27, 2022.
Here is what Third Avenue Management Real Estate Value Fund has to say about D.R. Horton, Inc. (NYSE:DHI) in its Q1 2022 investor letter:
“Outside of these additions, the Fund also sold “out-of-the-money” put options on the common stock of D.R. Horton, Inc. (“DR Horton”)-the largest homebuilder in the U.S. that accounted for nearly 1 out 9 new homes sold in the U.S. last year. Having followed the company for years, Fund Management can say without hesitation that DR Horton is an incredibly efficient builder focused on delivering quality product at the entry-level price point (its average selling price was less than $325,000 last year) with leading positions in key Sunbelt markets including Dallas, Houston, Austin, Atlanta, and Phoenix.
While the near-term outlook for DR Horton is somewhat uncertain given mortgage rate and supply chain volatility, the medium-to-long-term prospects for volume-based homebuilders with super-strong balance sheets and scale advantages seem promising (such as DR Horton and Lennar Corp.) in Fund Management’s view. This is especially the case when considering that:
- Residential inventories are at record- low levels in most major markets whether gauged by “month’s supply” or aggregate units available,
- Demand for single- family residences is accelerating as the largest generation in U.S. 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
- 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…” (Click here to see the full text)
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Our calculations show that D.R. Horton, Inc. (NYSE:DHI) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. D.R. Horton, Inc. (NYSE:DHI) was in 54 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 51 funds in the previous quarter. D.R. Horton, Inc. (NYSE:DHI) delivered a -16.58% return in the past 3 months.
In April 2022, we published an article that includes D.R. Horton, Inc. (NYSE:DHI) in 5 Housing Stocks Redditors are Buying. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
