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Lennar beat Q4 expectations but the stock is moving lower because of guidance.The outlook points to a sharp contraction in the home-building industry.This is bad news in the near term but sets up an opportunity for later in 2023.Lennar Corporation (NYSE:LEN) has a lineup is on the higher end of the housing spectrum. Its balance sheet is in the best shape it has been in for years. The problem is not the supply-demand situation because that remains firmly in favor of all the homebuilders. The problem is in the near to midterm outlook which is deteriorating quickly. Q3 2022 hedge fund letters, co...
ValueWalk
The Golden Age Of Homebuilding is already overRising interest rates are cutting into new sales and total activityA correction is already underway in the homebuilders and it may gain momentum after the reports from Lennar and KB HomeIt was just a year or so ago that Wall Street pundits were touting a Golden Age for the homebuilders (NYSEARCA:XHB) like Lennar (NYSE:LEN) and KB Home (NYSE:KBH). The combination of low-interest rates, high demand for homes, a lifestyle shift brought on by the pandemic, and pandemic stimulus had the industry set up for growth in a way that was only limited by labor ...
ValueWalk
SummaryAs a fundamental investor, you may face a situation when the market price drops below your purchase price. How do you decide whether it is time to get out or continue to hold?Lennar Corporation (Lennar) market price had declined by about 30% since its peak in Dec 2021. If you had bought it at a price higher than the current price, I have a decision framework to help you think through whether to hold or exit.It is a framework where the comparison between price and intrinsic value is still core. Also, it addresses the various behavioural biases and opportunity costs when deciding whether ...
ValueWalk
Dear fellow investors, Q4 2021 hedge fund letters, conferences and more Ben GrahamBen Graham is ascribed as being the father of value investing. The intellectual framework he brought to investors was using the available accounting to measure value of a business. His way of measuring was book value, the total assets minus all liabilities. By figuring out this number, he could then divide this metric by the total shares outstanding to understand how much book value per share (what some may call net worth) a company had versus what the price the shares were trading for in the stock market. This i...
ValueWalk
SummaryLennar Corporation (NYSE:LEN) (Lennar) became the leading homebuilder mainly due to acquisitions. If Lennar relied on organic growth, it would probable only achieve revenue growth of about 5 % per annum.Q3 2021 hedge fund letters, conferences and more The homebuilding sector is cyclical. There is a 0.9 correlation between the US Housing Starts and Lennar’s revenue. When the US Housing Starts mean revert, so will Lennar’s revenue and earnings.Lennar should be analysed and valued through a cyclical lens. A valuation of Lennar based on a cyclical model showed that there is no margin of saf...
ValueWalk
Companies in the homebuilding industry include companies that primarily develop single-family new homes, as well as offer financing and remodeling activities. Prior to the coronavirus pandemic, the industry was performing well owing to rising per capita disposable income, improving macroeconomic conditions and accommodative interest rates. The industry is now again starting to pick up, making it a good investment opportunity. Let’s take a look at the ten biggest homebuilders companies. Q3 2021 hedge fund letters, conferences and more Ten Biggest Homebuilders CompaniesTo rank the ten biggest ho...
ValueWalk
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