Warren Buffett is rightly known as the greatest investor of all time.
His company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), is now worth roughly $1 trillion, thanks to little more than Buffett's investing acumen. Berkshire is one of the most valuable companies in the world, not because of a blockbuster product or dominance of a certain industry, but because of Buffett's ability to make market-beating investments -- both in Berkshire's stock portfolio and its wholly owned subsidiaries.
Not surprisingly, the 94-year-old's investing moves are still closely followed by millions. Berkshire maintains a relatively svelte portfolio of 39 stocks and exchange-traded funds (ETFs) at the moment, meaning it's worth paying attention to the stocks he owns.
In recent years, Berkshire has added a number of homebuilders and housing-related stocks to its portfolio, and those moves seem ready to pay off as the housing market is expected to rebound next year. The Federal Reserve is now cutting interest rates, which should help lower mortgage rates, and drive a rebound in home buying. Existing home sales are now down 40% from their pre-pandemic levels.
Keep reading to see two Warren Buffett stocks that could soar on the trend into next year.
Image source: The Motley Fool.
1. NVR
NVR (NYSE: NVR) is often considered the best-in-class homebuilder stock, and it's easy to see why. The stock is up an incredible 175,000% over the last 30 years, meaning it's turned $1,000 into $1.75 million.
The homebuilder, whose brand names include Ryan Homes, NVHomes, Fox Ridge Homes, and Heartland Homes, operates in 16 states, focusing on the eastern half of the U.S., and Washington, D.C. It's more financially conservative in down markets than its peers and has thrived through a different business model than they have.
Rather than buying land to build on, which is risky, NVR has an asset-light model that is based on lot purchase agreements, giving it an option to buy lots and helping it preserve its liquidity.
That's all helped the company better manage the boom and bust cycles of the homebuilding industry. With a national housing shortage estimated in the millions of homes, there is ample opportunity for NVR to grow, especially as the housing shortage and a lack of affordable housing have become central issues in the election.
Recent growth has been modest due to headwinds in the housing sector, including high mortgage rates, but that should ease now that the Fed is cutting rates. As homebuying gets more affordable, increasing demand for new homes should benefit a seasoned operator like NVR.
At a price-to-earnings (P/E) ratio of 20, the stock is well-priced to take advantage of a new housing boom.
2. Louisiana-Pacific
Staying within the housing industry, but moving on to building materials, another promising Buffett stock to buy is Louisiana-Pacific (NYSE: LPX). It's the world's largest producer of oriented strand board (OSB), an engineered wood product that's similar to particle board.
The company is known for products like siding, sub-flooring, and sheathing. Like NVR, Louisiana-Pacific should benefit from new home construction. It should also benefit from home improvement projects and renovations, which are expected to bounce back after a lull due to falling interest rates, and Americans having record levels of home equity to tap, reaching $35 trillion in the second quarter.
Falling rates on home equity loans will make it easier for Americans to tap that wealth, even if they don't move.
Louisiana-Pacific is already seeing strong demand for its products. Siding sales rose 30% to $415 million in Q2, and OSB sales were up 53% to $351 million.
The company is also seeing strong growth on the bottom line, reporting net income of $160 million, up from a loss of $21 million in the quarter a year ago. Its guidance calls for its growth to continue, and tailwinds should pick up as interest rates continue to fall.
The OSB supplier could be seeing a surge in demand by this time next year as the home improvement market bounces back.
Should you invest $1,000 in NVR right now?
Before you buy stock in NVR, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NVR wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,069!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 7, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and NVR. The Motley Fool has a disclosure policy.
