Berkshire Hathaway Slows Lennar Purchases; Stake Reaches 11.2%
Key Points
- Berkshire Hathaway purchased $53.6 million of Lennar Class A shares and $329,000 of B shares Monday through Wednesday, raising its stake to 11.2%.
- The company's average daily buying pace fell to under $18 million this week compared to $58 million per calendar day between September 17 and 25.
- Morgan Stanley initiated coverage Thursday with an underweight rating and $65 price target, representing a 19% decline from Lennar's Friday close of $79.81.
Morgan Stanley initiated coverage of Lennar on Thursday with an underweight rating and a $65 price target, representing a 19% decline from Lennar's Friday close of $79.81. The stock fell 2.8% during the day. The homebuilder sector faces headwinds as the 30-year fixed-rate mortgage climbed to 7.30% according to the Mortgage Bankers Association, the highest level since late 2023, deterring potential homebuyers who confront higher house prices compared to the previous year.
Buffett's Contrarian Bet Against Mortgage Market Pessimism
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Berkshire's purchasing pattern suggests Buffett is deploying capital opportunistically into a sector facing near-term challenges but positioning for long-term recovery. The deceleration from $58 million daily purchases to $13.5 million represents a 77% reduction in buying intensity, indicating either reduced conviction at current price levels or portfolio rebalancing following the 11.2% stake threshold.
Warren Buffett reclaimed the No. 10 position on the Forbes billionaire ranking with an estimated net worth of $143 billion as of 5:15 PM ET Friday, $3 billion ahead of Amancio Ortega. Buffett's ranking improved after Inditex shares declined 8% over a month-long period.
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The contrast between Berkshire's continued accumulation and Morgan Stanley's bearish positioning exposes a fundamental disagreement about Lennar's trajectory. Buffett's investment thesis appears predicated on mean reversion in housing demand once mortgage rates stabilize or decline, while Morgan Stanley's underweight rating reflects skepticism about the near-term housing recovery. Analysts expect mortgage rates to remain elevated through the remainder of 2024, presenting a test of Berkshire's long-term conviction versus immediate market headwinds.
Berkshire did not disclose whether it made additional purchases on Friday, with the company required to file by Monday.
Market Outlook
Berkshire's slowing purchase pace suggests buying discipline rather than pullback conviction. If mortgage rates retreat below 7% within 60 days, expect Berkshire to resume higher daily purchase volumes. Conversely, rates holding above 7.30% could trigger further deceleration and validate Morgan Stanley's bearish thesis through year-end.
Sources: CNBC and other international news outlets.
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