Warren Buffett Sells Off Housing Market Stock Shares (Newsweek)

Politics
1

Warren Buffet, one of the most successful investors of all time, (buys only established companies, always 10-year or longer window, avoids flashy tech like the plague) made waves last year when his company bought $800 worth of stock in homebuilders.

Apparently he has now closed his entire position in the industry.

For context: throughout 2023 he has been selling-off far more stock than usual and cash is now a much larger-than-usual share of his portfolio.

From the article:

Warren Buffett, one of the most successful investors of all time, walked back on the bet he had made on the U.S. housing market last year, selling off recently bought stocks in major U.S. homebuilders.

In August 2023, Buffett’s company Berkshire Hathaway informed the U.S. Securities and Exchange Commission (SEC) that it had invested in D.R. Horton, Lennar and NVR in the quarter ending June 30. . . .

However, in February, Buffett’s company disclosed to the SEC that it had already sold off all of its 5,969,714 shares of D. R. Horton in the quarter ending on December 31, 2023, as reported by Lance Lambert on ResiClub. The journalist said: “It’s interesting that Warren Buffett would so quickly sell off his D.R. Horton stake and exit the homebuilder bet.” . . .

Lambert then quoted Buffett’s 1996 letter to shareholders, where the investor mentioned that, “if you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” . . .

While Buffett hardly ever reveals his reasons behind major investments, Berkshire Hathaway is sure to have profited enormously from its investment in D.R. Horton, after the company’s share price went up by 70.5 percent last year. Share prices for the other two homebuilders, Lennar and NVR, also went up by respectively 64.7 and 51.8 percent. . . .

2

Buffett’s decision to exit the homebuilding market entirely, while obviously bearish for home prices should be taken in context.

HIs position in the industry could be described as “new” and “not large.”

So even though he did sell 100% of his homebuilding stock he is selling a lot of stocks and piling up more and more cash.

He also sold

  • 77% of his HP stock
  • 32% of his Paramount stock, &
  • 1% of his Apple stock

Each of the above are/were larger holdings and holdings he has had for a long time.

Early last year his top ten (of 50 or so) stock holdings were

  • Bank of America (BAC), 1.03 billion
  • Apple (AAPL), 905.6 million
  • Coca-Cola (KO), 400 million
  • Kraft Heinz (KHC), 325.6 million
  • Occidental Petroleum (OXY), 248.1 million
  • American Express (AXP), 151.6 million
  • Chevron (CVX), 126.1 million
  • Nu Holdings (NU), 107.1 million
  • Paramount Global (PARA), 63.3 million
  • Citigroup (C), 55.2 million

https://www.investors.com/news/warren-buffett-stock-buys-sells-q4-2023-berkshire-hathaway-13f/

https://www.investors.com/research/warren-buffett-stocks/

3

keeping a large pool of liquid cash… lawfare going around?

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4

Could be a quick hit given the profit he made, in sector he’s losing faith in…

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5

Don’t blame him for getting out of the housing market.

It’s bound to be crashing or soon will be thanks to draconian interest rate increases due to Biden’s insane spending. Many many mortgage loan underwriters have been laid off.

Wasteful spending such as the green new deal and the “inflation” bill.

Money just thrown to the 4 winds.

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6

Certainly his homebuilder stocks were not one of his major holdings, nor did he have them very long. So selling HP Paramount and Apple might mean more.

7

When he makes recent purchases public, it is usually with the objective of triggering a short term pump and dump. He knows that there are those who will mindlessly rush to buy anything he is currently expanding positions in. When he is long term buying, he is very tight lipped about his acquisitions until after he has finished buying.

8

He is required to make his buys and sells public in quarterly statements.
I do not know which of these buys/sells he revealed prior to that.

But yes, your are correct, He does not routinely reveal his buys/sells before then, although I am sure, as a celebrity, he is frequently asked a lot of questions.

9

He’s 93. Nothing he does anymore is long term. :wink:

10

I agree. While some people have made a bundle investing in housing, it’s very risky because the bubble inevitably does burst. It’s certainly not for the faint of heart.

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LOL

He has never invested for himself (for his age or risk tolerance).
Never adjusted according to his age.

Best comparison is if he is investing on behalf of a permanent institution like a university endowment or insurance company (technically, on paper Berk. Hath is an insurance company.)

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It was made public information in Aug 2023, the chasers then followed him into the positions over the next few months. Then in December, with no reporting due again until February he quietly liquidated the positions. Yeah, definitely a pump and dump.

13

Or maybe he had a second look. and a change of mind.

Right now the number of new-build homes in the South and West is rapidly approaching levels of the previous bubble. First-time buyers seldom buy newly-constructed homes so either

  • they will go unsold at normal market prices or
  • they will be bought by people giving up their 2.5% mortgages.
    (Yech I hate low my mortgage rate?)

Last time home construction was this rapid in those two places, no one was locked into a 2.5% mortgage, demand was m/l normal and yet, still the building boom failed.
What will happen this time?

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It was 7 percent only 20 years ago. People keep thinking that the iteerest has been down the 80s…

Draconian!!! :joy:

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The fundamentals in housing aren’t really that different. The inflated prices of new construction were already an issue, the interest rates were also an expected event, especially for a professional investor. The rate increases started long before August and making the investment wasn’t supported as a long term play at that time. The long term play will be after the bottom falls out and the herd is running scared on emotion.

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16

Maybe we should be interpreting this in the context of stock market indicators, instead of housing market indicators.

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The Buffett Indicator is the ratio of total US stock market value divided by GDP. Named after Warren Buffett, who called the ratio “the best single measure of where valuations stand at any given moment”. (Buffett has since walked back those comments, hesitating to endorse any single measure as either comprehensive or consistent over time, but this ratio remains credited to his name).

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"Twenty years ago … " We have a whole new generation of potential first-time home buyers who have no idea how “it used to be.” And twenty years ago, those buyers whining about 7% had no concept of the 15-16% rates twenty (-three) years before that. :wink:

This is why I always tell youngsters who are fretting about buying a house because of high interests to just do it. If interest rates go down, they can always refinance.

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18

Twenty years ago

  • George W Bush was running for re-election.
  • John Kerry’s Swiftboat boat mates were revealing that his “war wound” was nothing more than a splinter, treated with Neosporin and a band aid.
  • And I wandered onto the Hannity forum, where I felt right at home because the forum was home to many many cons and libertarians explaining how big government liberalism, including that at the Fed, was making America worse in some way.

Twenty years on (today)

  • Either the conservatives and libertarians were wrong, dead wrong,100% wrong about everything we ever said about the economy, or
  • Or we were right, but somehow all those economic problems miraculously manages to leave housing (typically one-third of a family’s income) no worse-off at all.
  • Or . . . perhaps . . . just perhaps, cons over the age of 50 have to start admitting to themselves “Yes we were right. The economy has gotten worse, and one of the symptoms is that housing now is not like housing then. Twenty years of liberalism failed. We were right. I told ya so.”

I’d be interested to read which of the above you think it is.

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