Two Billionaire Investors Bet on Emerging Trend: Analyzing Their Recent Stock Purchases

Key Insights

• Mortgage rates remain high despite some interest rate reductions

• A backlog of unsold homes persists, coupled with a construction shortage

• Homebuilding stocks appear undervalued in the current challenging market

Examining the portfolios of various money managers reveals striking differences. Market outperformance can be achieved through diverse strategies, from concentrated portfolios of fewer than 10 stocks to expansive ones with thousands of holdings and teams of daily traders.

Smaller portfolios offer clearer insights into managers’ market views and trend predictions. While many have long followed Warren Buffett’s moves, other billionaire money managers’ trades can be tracked through 13F filings. Some staple names, such as Amazon and Nvidia, frequently appear in major portfolios.

Recently, two billionaires - Berkshire Hathaway’s CEO Warren Buffett and Stanley Druckenmiller of Duquesne Family Office - both acquired stakes in two lesser-known stocks, along with others indicating their confidence in a growing housing sector. Let’s delve into the details.

Anticipated Interest Rate Cuts

Recent years have witnessed fluctuating economic trends and a corresponding market. Investors have keenly observed the Federal Reserve’s interest rate decisions, which have begun to decline from post-pandemic peaks.

Elevated interest rates aim to curb economic activity, targeting inflation reduction. These rates complicate borrowing for both businesses and individuals, hindering economic growth and home purchases, as most buyers rely on mortgages for their most significant lifetime investment.

Higher rates can substantially increase a home’s long-term cost, potentially adding thousands to monthly expenses.

While last year’s interest rate cuts briefly impacted mortgage rates positively, they subsequently rebounded and remained persistently high, maintaining pressure on the housing market.

Latest public data indicates a 1.1% year-over-year increase in home prices, a 1.6% decrease in home sales, and a 0.13% rise in the national average 30-year fixed mortgage rate to 6.7%. Additionally, the U.S. has faced a prolonged housing shortage, with supply remaining tight. The U.S. Chamber of Commerce reports a deficit of 4.5 million homes due to years of underbuilding.

However, if the Fed implements significant rate cuts at its September meeting, market activity might resurge. This potential uptick would necessitate increased housing supply, spotlighting homebuilders like D.R. Horton (NYSE: DHI) and Lennar (NYSE: LEN), both of which Buffett and Druckenmiller invested in during the second quarter.

They also acquired other stocks in related sectors. Druckenmiller invested in Builders FirstSource, a manufacturer of building components like doors, countertops, and drywall. Buffett’s choices were more tangentially related to construction, including Nucor, a steel products manufacturer, and Allegion, a tech-based home security products company.

Construction Sector Revival

D.R. Horton, the largest U.S. homebuilder, holds a leading position in 4 of the top 7 U.S. housing markets. As of the fiscal 2025 third quarter (ended June 30), its inventory comprised 38,400 homes, with 25,000 unsold. The company closed on 23,160 homes.

Lennar, a smaller, more specialized builder, reported 2,900 homes in inventory at the second quarter’s end. While acknowledging market “softness,” the company considers this within historical norms.

With thousands of new homes awaiting buyers, growth potential exists once mortgages become more affordable. This suggests now might be an opportune time to invest in these stocks.

Both companies are experiencing sales and earnings declines. Their stock prices have fallen over the past year but are rebounding in 2025. Both trade at low forward one-year P/E ratios below 14.

Notably, Buffett invested in both these stocks, as well as homebuilder NVR, in 2023. While retaining his NVR stake, he divested D.R. Horton before year-end and has been increasing his position in Lennar.

While homebuilding presents the most obvious way to capitalize on this trend, with Buffett and Druckenmiller’s purchases suggesting an anticipated housing market recovery, investors concerned about prolonged market stagnation might consider housing-adjacent stocks less directly exposed to housing market pressures.