Green & Gold FundRecommendation: Buy D.R. Horton, Inc. (DHI)
• Housing market indicators are strong• Room for recovery• Housing recovery began in mid 2011
• Financially sound• Overall, better than competitors
Key Investment Points
• Homebuilders and mortgage financiers• Major companies• DHI, PHM, MDC, RYL, NVR, KBH, LEN
• Home construction, sale, and financing• Also some deal in land acquisition and development
Industry Overview
Housing Starts
Housing Market Index
Construction Spending
S&P Case-Shiller HPI
New Home Sales
• Housing Starts (16 April)• 1.04 M (BC, prior .917 M)
• Housing Market Index (15 April)• 42 (MC, prior 44)
• Construction Spending (1 April)• M/M 1.2% (BC, prior M/M -2.1%
• S&P Case-Shiller HPI (26 March)• M/M 1.0% (C, prior M/M 0.9%)
• New Home Sales (23 April)• 417K (MC, prior 411K rev.)
Economic Data Summary
• Homebuilding and Financing• Constructs, sells, and finances
homes• Domestic market
• Acquired Breland Homes (2012)
• 2011 Revenue: $130 M
• Q2 2013 DHI Earnings
• 26 April at 10:00 AM Eastern
Previous Close 24.69
1 Year Target Price 24.00 – 26.00
52 Week Range 14.37 – 25.56
Average Volume (3M)
6.02 M
Market Cap. $7.06 B
P/E (ttm) 8.49
EPS (ttm) 2.8
Dividend and Yield 0.15 (0.60%)
Beta 1.27
Employees 3,500
DHI Company Profile
DHI Price Chart
DHI vs S&P vs XHB
DHI Financials
• Low numbers leading up to the housing crash• Recovering numbers coinciding with the better
housing numbers• Sales, revenue, net income, etc. are all
expected to rise
DHI Financials
Company Market Cap.
P/E Price to Book
Dividend (Yield)
TD/TA
ROA ROI ROE Profit Margin
DHI 7.72 B 8.49 2.10 0.15 (.64) 34.4 15.2 18.5 30.8 21.96
MDC 1.77 B 28.3 1.99 2.0 (2.78) 42.2 3.3 3.57 7.04 5.21
NVR 4.95 B 26.0 3.33 0 23.2 8.24 10.5 12.7 5.66
RYL 1.90 B 52.0 3.64 0.12 (.30) 58.7 2.41 2.90 8.81 3.24
TOL 5.70 B 11.9 1.84 0 36.5 8.67 10.1 17.1 25.9
PHM 7.61 B 36.8 3.43 0 115 3.03 3.46 10 15.7
KBH 1.84 B 5.11 0.14 (.46) 67.3 -2.32 -2.5 -15 -3.8
LEN 7.97 B 12.5 2.32 0.16 (.39) 48.6 6.74 7.34 21.9 16.01
Comparison to Industry
SWOT Analysis
Strengths Increase in Sales Order Backlogs Specialized Home BuildersIntegrated Operations
Weaknesses Weak Profitability IndicatorsBusiness Concentration: the United States
Opportunities Rising Demand of Senior Housing in the United StatesGrowth Trends: Echo Boomer PopulationReal Estate Market Outlook: United States
Threats Intense CompetitionStringent Government RegulationsGlobal Economic Scenario
• We should own DHI because:
• Housing market still has much room to recover
• DHI has good financials and can capitalize on the recovery
• Beware of financial news indicating slowdown
Investment Thesis
• Sector : Industrials and Materials• Industry Group: Residential Construction• Current Holdings: UPS, GE, XLI, GDX, XYL, and SAND
• Buy 250 shares of DHI at $24.00 (approximately $6000.00, 1.09% of portfolio)
Current Portfolio and Recommendation
Sector Target Allocation
Current Allocation
Remaining Allocation
Industrials 6.19% 5.77% 0.4%Materials 2.04% 3.61% -1.6%
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