We recently published a list of 8 Best Low Float Stocks to Invest in Now. In this article, we are going to take a look at where NVR, Inc. (NYSE:NVR) stands against other best low float stocks to invest in now.
Stocks with low public float refer to shares of a company that are available for trading by the public, but in relatively small quantities. The public float is the portion of a company’s shares that are not held by insiders, such as company executives, or major institutional shareholders who are usually long-term passive investors. When a stock has a low float, it can be more volatile because the smaller supply of shares means that even small changes in demand can significantly impact the stock price. For investors, this can present both opportunities and risks. While low float stocks may see large price movements, they can also be harder to trade, leading to higher spreads and less liquidity, which may be particularly painful when seeking to liquidate the investment. Consequently, investors need to be cautious with low float stocks and only buy them strategically with very high conviction.
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We believe that low float stocks become particularly attractive during times of heightened volatility, which usually happens amid pronounced geopolitical challenges or regime changes, when investors don’t know how to react to rapidly evolving circumstances. With the US stock market officially in correction territory and the implied volatility index more than 75% above the year-to-date lows, the current times perfectly fit our description of uncertainty. First, the markets have negatively reacted to the realization that tariffs will soon become a reality rather than a negotiation tool used by the new administration; the President further announced 50% tariffs on Canadian steel and aluminum, which caused some havoc among investors. On the positive side, some progress on the tariff-avoiding deal between the US and Canada, as well as the ongoing peace negotiations related to Ukraine in Saudi Arabia, provided some optimism and a boost for the stock market. Still, the picture remains dull for many investors who became accustomed to the high-growth 2023-2024 period, fueled by the AI megatrend.
A key piece of the puzzle to keep in mind when picking the right low float stock to invest in is the near- and mid-term outlook for the sector it operates in. It is well known that macroeconomic headwinds in the end market may mute even the most exceptional growth story, regardless of how strong the company’s moat is. We clearly see sluggish conditions in the construction sector, as new data shows a pronounced slowdown in both residential and commercial starts. With tariffs on construction materials kicking in, as well as the new administration being a headwind for immigration, we see this sector potentially remaining pressured for the near future. The consumer discretionary space could see slow growth as well in the upcoming quarters, as recent layoffs, as well as a tanking stock market, are very likely to make consumers more cautious with their spending. Finally, some niches in the industrial sector could also be pressured due to lower federal spending and the deteriorating Capex outlook reported by business surveys. The outlook on every other sector remains unchanged and could potentially nest some exceptional low float stocks to invest in right now.
Our Methodology
To compile our list of low float stocks, we used a Finviz screener to filter for companies that have less than 10 million shares floating for purchase. We then compare the sample with our proprietary list of hedge fund ownership and include the top 8 stocks with the highest number of hedge funds that own the stock.
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 team of construction workers laboring together to build a townhome complex.
NVR, Inc. (NYSE:NVR)
Number of Hedge Fund Holders: 45
NVR, Inc. (NYSE:NVR) is a homebuilding and mortgage banking company that operates in the United States. It constructs and sells single-family homes, townhomes, and condominiums under the Ryan Homes, NVHomes, and Heartland Homes brands. The company primarily serves markets in the East Coast, Midwest, and Southeast through a land-light business model, acquiring finished lots from developers rather than holding large land inventories. NVR also provides mortgage financing and settlement services through its NVR Mortgage division. Revenue is generated through home sales and financial services, catering to a broad range of homebuyers.
NVR, Inc. (NYSE:NVR) achieved notable financial and operational growth in 2024, with consolidated revenues increasing by 11% to $10.5 billion and net income rising 6% to $1.68 billion, alongside a 9% growth in diluted EPS compared to 2023. New orders grew by 4%, supported by a 2% rise in the average sales price, reflecting stronger demand during the first three quarters due to limited supply in the resale market and stabilized mortgage rates. However, demand slowed in the fourth quarter, particularly in the South East segment, as rising mortgage rates and increased home supply affected affordability. Despite a slight decline in the homebuilding gross profit margin to 23.7% and a 3% decrease in backlog units, the backlog’s dollar value grew by 1%, reaching $4.79 billion. The mortgage banking segment also performed well, with income before tax surging 17% to $154.9 million.
Looking ahead, NVR, Inc. (NYSE:NVR) expects that affordability issues, inflationary pressures, interest rate volatility and economic uncertainty may continue to weigh on future demand. The company also anticipates continued cost pressures related to building materials, labor, and land costs, which are expected to impact profit margins based on their ability to manage these costs while balancing sales pace and home prices. Despite these challenges, management believes the company is well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of their balance sheet and disciplined lot acquisition strategy.
Overall, NVR ranks 1st on our list of best low float stocks to invest in now. While we acknowledge the potential of NVR 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 NVR 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.
