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 NVR, Inc. (NYSE:NVR) 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 team of construction workers laboring together to build a townhome complex.
NVR, Inc. (NYSE:NVR)
Number of Hedge Fund Holders: 45
The American home builder NVR, Inc. (NYSE:NVR) is headquartered in Reston, Virginia. The company sells and constructs homes under three brand names including Ryan Homes, NVHomes, and Heartland Homes. The firm operates in two segments which include homebuilding and mortgage banking.
NVR, one of the largest homebuilders in the United States, builds homes in 36 metropolitan areas in sixteen states and Washington, D.C. Historically, the firm claims to be one of the market leaders in each of the markets where it constructs homes. Bretton Capital Management, an investment management company, stated the following about NVR in “Bretton Fund” fourth quarter 2024 investor letter:
“Thirty-year traditional mortgage rates were over 6% for all of 2024, the highest they have been since the 2008 financial crisis, a sharp change from 2021 when they were below 3% for part of the year. Existing house sales hit their lowest levels since 1995, and new housing starts were down 4% from 2023. Lean times for the real estate industry. NVR, Inc. (NYSE:NVR) seems to have not noticed these market trends. They sold 22,560 houses in 2024, 21,540 in low-interest-rate 2021, and 19,668 in pre-Covid 2019. They keep grinding away with their basic business model, and they keep driving their earnings and buying back stock. In 2019, NVR earned $221 per share; in 2024, selling only 15% more houses, they earned $507 per share. NVR stock gained 17% on the year.”
For its fourth quarter ended December 31, NVR, Inc. (NYSE:NVR) witnessed its net income climb 12% and diluted earnings per share rise 15% over the year. Consolidated revenues for the quarter increased 17% year-over-year. Homebuilding revenues increased by 16% from $2.39 billion in the fourth quarter of 2023 to $2.78 billion in the fourth quarter of 2024.
Overall, NVR ranks 4th on our list of best residential construction stocks to buy. While we acknowledge the potential of NVR 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 NVR 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
