Green & Gold Fund Recommendation: Buy D.R. Horton, Inc. (DHI )
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Transcript of Green & Gold Fund Recommendation: Buy D.R. Horton, Inc. (DHI )
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Green & Gold FundRecommendation: Buy D.R. Horton, Inc. (DHI)
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• Housing market indicators are strong• Room for recovery• Housing recovery began in mid 2011
• Financially sound• Overall, better than competitors
Key Investment Points
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• 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
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Housing Starts
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Housing Market Index
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Construction Spending
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S&P Case-Shiller HPI
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New Home Sales
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• 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
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• 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
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DHI Price Chart
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DHI vs S&P vs XHB
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DHI Financials
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• 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
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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
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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
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• 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
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• 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%