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  1. #1

    Default LEN ==> The Waltham Winner

    The Kansas City Chiefs gakked in the Super Bowl and now everyone thinks Tom Brady is great and Bill Belichick sucks. Now the Chiefs quarterback, Partick Mahomes, is pretty darn good. But he’s not the greatest quarterback who ever played for the Chiefs. That would be Len Dawson:

    Len won a Super Bowl for the Chiefs but here’s one thing you didn’t know. When I worked in an air separation plant in Suffield, CT - the boss of the plant played football against Len Dawson in high school. He told me the story of how he tackled Len Dawson. That’s the story. That’s it.

    But since we’re speaking about Len, today I bought stock in LEN (Lennar Corporation) at 104.06. I will sell it in 4 – 6 weeks at 120.19. Here’s why I like LEN:

    Now that is one hell of a good lucking chart. This stock is up 164% in the last 12 months and yet its PE is sitting pretty at around 10.8. That is incredibly cheap for a stock that has this kind of relative strength and upward momentum.

    What’s the story? Suppose you were a company that sold a product that EVERYONE wanted but there wasn’t any supply of your product, wouldn’t you say your company is well positioned for the future? Well, that’s what is going on in the homebuilder’s market right now. U.S. homebuilding surged to nearly a 15-year high in March. The sharp rebound reported by the Commerce Department on Friday added to robust retail sales in March in suggesting that the economy was roaring after a brief weather-related setback in February. Increasing COVID-19 vaccinations, warmer weather and massive fiscal stimulus are driving the economy, with growth this year expected to be the strongest in nearly four decades. Yep....4 decades.

    Housing starts surged 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the highest level since June 2006. Starts soared 37.0% on a year-on-year basis in March. Single-family homebuilding, the largest share of the housing market, surged 15.3% to a rate of 1.238 million units in March. Single-family building permits rose 4.6% to a rate of 1.199 million units. Americans taking advantage of low borrowing costs and looking to flee cities for suburbs snapped up homes at a rate not seen since the mid-2000s housing bubble. The national median home-sale price grew at the fastest year-over-year rate on record in March. Contractors are also growing increasingly confident in market conditions. The National Association of Home Builders and Wells Fargo sentiment index edged higher in an early April reading, boosted mainly by new traffic from prospective buyers.

    Lennar Corporation, together with its subsidiaries, operates as a homebuilder primarily under the Lennar brand in the United States. It operates through Homebuilding East, Homebuilding Central, Homebuilding Texas, Homebuilding West, Financial Services, Multifamily, and Lennar Other segments. The company's homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development, and sale of residential land. It primarily sells single-family attached and detached homes in communities targeted to first-time, move-up, active adult, and luxury homebuyers. The company also offers residential mortgage financing, title insurance, and closing services for home buyers and others. In addition, it involves in the fund investment activity; and originates and sells into securitizations commercial mortgage loans. Further, the company develops, constructs, and manages multifamily rental properties. Lennar Corporation was founded in 1954 and is based in Miami, Florida.

    The infrastructure package is going to include funding for cheap housing, which will create even more business for home builders like LEN. The housing shortage is a boon for home builders, retail supply, etc. Interest rates are going to be at low low low levels for at least a couple of years. A month has gone by since the last earnings report for Lennar (LEN). Shares have added about 16.9% in that time frame, outperforming the S&P 500. The quarterly results benefited from robust housing market fundamentals backed by low interest rates (which inched a bit higher in recent times), a solid stimulus package, and persistent undersupply of new as well as existing inventory. The company reported adjusted quarterly earnings of $2.04 per share, blowing up the ANAL-yst estimate of $1.65 by 23.6%. In the year-ago period, it reported earnings of $1.27 per share. This marked the eighth consecutive quarter of an earnings beat. The results mainly benefited from higher revenues, effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage.

    Homebuilding: Revenues at the segment totaled $4.94 billion, up 18.5% from the prior-year quarter. Within the Homebuilding umbrella, home sales contributed $4.89 billion to total revenues, up 18.1% from a year ago. However, land sales accounted for $47.6 million, up 77.3% from the prior-year quarter. Higher home sales were due to increased new home deliveries.

    Home deliveries for the reported quarter improved 19% from the year-ago level to 12,302 units. The average sales price of homes delivered was $398,000 compared with $402,000 in the year-ago figure.
    New orders grew 26% from the year-ago quarter to 15,570 homes. Potential value of net orders also increased 31% year over year to $6.5 billion.

    Backlog at fiscal first quarter-end climbed up 25% from a year ago to 22,077. Potential housing revenues from backlog also advanced 32% year over year to $9.5 billion.

    Gross margin on home sales was 25% for the quarter, up 450 bps. The upside can be attributed to its efforts toward reducing construction costs and a solid housing market scenario. Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. In other words, it is party time at Lennar. By the way, we also get a 0.7% dividend.

    Here’s what the boss had to say:

    Jon Jaffe -- Co-Chief Executive Officer and Co-President (no relation to Mad Magazine’s Al Jaffee of Snappy Answers to Stupid Questions Fame):
    “As we look to the balance of the year, we're confident that our gross margins will remain around 25% and will drive our SG&A lower, producing higher net margins and a stronger bottom line, while maintaining our planned volume.”

    Hey…buying LEN is a layup. We’re in the eye of the homebuilding hurricane and we’re in for a WILD ride. Jumping aboard with my hammer and shingles!

    I am HUGE!

    $$$MR. MARKET$$$
    Last edited by mrmarket; 05-04-2021 at 09:18 PM.

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  2. #2
    Join Date
    Sep 2003


    Great pick, I'm all in on housing with you at 104! (this will WILD be for sure, if housing keep up its fire!)

  3. #3
    Join Date
    Sep 2003


    I just added to (doubled down) my LEN position at 100 today, for an average cost of 102. Sell target is now 118, instead of 120!

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