“From January 1, 1995 to January 3, 2022 Lennar stock returned roughly 4020% versus the S&P 500 return of roughly 1650%. Attractive demographics & household formation are one of the more predictable thematics.”
COMPANY PROFILE
Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. Lennar builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar's homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. LENX drives Lennar's technology, innovation and strategic investments.
Style Factor Benefits
From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Lennar scores well as of 12/31//2022:
88% strong value via high FCF Yield
89% high free cash flow growth
82% low price/sales
96% high shareholder yield - benefits shareholders receive in the form of cash dividends, net stock repurchases, and debt reduction
93% strong 5 year ROIC growth
88% strong EPS growth
97% high sales surprises last quarter
1/3/2022 Update
Lennar could be considered a tactical investment for Dynamic Brands rather than a core, long-term allocation but the trend of home ownership has longer teethe than many think. As interest rates have fallen and employment & incomes stay strong, home affordability, while short term challenging, is still a positive factor in certain parts of the country. LEN has significant exposure to the growth parts of the country. As Millennials finally decide to nest, and they will, they will keep buying houses and improving their current house. Lennar and other home related companies should benefit given significant tailwinds in household formation and a favorable supply/demand picture. The stock is cheap, adds some value stock exposure and is playing in a favored category. The technical picture is also positive offering a solid tactical opportunity. The trends in all things “house” seem quite strong and sustainable and I like that these stocks have some solid defensiveness to them in a portfolio. When the economy cools off on a rate of change basis, rates will ease lower again and housing will get even more love from here. I’ll continue to build my position on days when rates are rising and housing stocks are soft.