Warren Buffett's Interest in Homebuilders Sparks Speculation on Return to The Home Depot
Warren Buffett, the renowned investor, has recently shown interest in homebuilders D.R. Horton and Lennar, benefiting from trends similar to those of The Home Depot. This move has sparked speculation about a potential return to the home improvement giant, given Buffett's past success with the company.
Buffett's investment in homebuilders comes as the median age of U.S. homes increases, indicating a growing demand for home improvement products and supplies. This trend favours The Home Depot, which has a solid operating margin of 13.1% and a return on invested capital (ROIC) of around 31.2%.
Since Buffett sold his stake in 2009, The Home Depot's stock has surged by approximately 1,570%, and its total return, including reinvested dividends, is around 2,370%. Despite its high trailing and forward P/E ratios close to 26, Buffett might consider The Home Depot, given his past success with the company. Notably, Berkshire Hathaway has recently bought stocks with higher forward P/E ratios, such as Heico and Pool Corp.
While Buffett's recent investments in homebuilders hint at a potential interest in The Home Depot, there's no public evidence of talks with major institutional investors or other large shareholders. As a 'business picker', Buffett's decision would depend on his assessment of the company's future prospects, given the favourable trends in the home improvement sector.
