Lennar stock climbed on Friday following disclosures that Berkshire Hathaway has accumulated a nearly 10% stake in the homebuilder. Market analysts describe the move as a textbook example of the conglomerate’s investment strategy.
“Berkshire likes to buy undervalued assets,” noted Catherine Seifert, an analyst at CFRA Research. She characterized the investment as a “classic Berkshire value play,” adding that the deal aligns well with current CEO Greg Abel, who succeeded Warren Buffett last year. Seifert highlighted Berkshire’s existing footprint in the sector, which includes the recent acquisition of Taylor Morrison, as well as holdings in building materials firms like Benjamin Moore and Johns Manville. The conglomerate also owns Clayton Homes, purchased in 2003 for nearly $2 billion.
The investment comes as Lennar navigates a challenging operating environment. In its fiscal third quarter report ending August 31, the company posted earnings per share of $1.23, falling short of the Wall Street consensus estimate of $1.29. Revenue also declined 8% year over year.
More significantly, Lennar provided fourth-quarter guidance below analyst expectations, pointing to ongoing affordability struggles driven by elevated interest rates. During a conference call with analysts, CEO Stuart Millar stated that 30-year mortgage rates hovering around 7% are constraining buyer qualifications and shrinking the potential customer base.
The broader housing market remains strained by a disconnect between supply and demand. A scarcity of new homes is driving up prices for existing properties, while high borrowing costs have excluded millions of first-time buyers from the market, dampening overall consumer confidence.
Despite these headwinds, the tough housing conditions may present attractive entry points for Berkshire, which reported a cash reserve of approximately $367 billion at the end of June. The news of the stake build came on the same day that Warren Buffett officially stepped down as chairman, with his son Howard Buffett assuming the role effective immediately.
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