Green & Gold Fund Recommendation: Buy D.R. Horton, Inc. (DHI )

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Green & Gold Fund Recommendation: Buy D.R. Horton, Inc. (DHI ). Key Investment Points. Housing market indicators are strong Room for recovery Housing recovery began in mid 2011 Financially sound Overall, better than competitors. Industry Overview. Homebuilders and mortgage financiers - PowerPoint PPT Presentation

Text of Green & Gold Fund Recommendation: Buy D.R. Horton, Inc. (DHI )

  • Green & Gold FundRecommendation: Buy D.R. Horton, Inc. (DHI)

  • Housing market indicators are strongRoom for recoveryHousing recovery began in mid 2011Financially soundOverall, better than competitors

    Key Investment Points

  • Homebuilders and mortgage financiersMajor companiesDHI, PHM, MDC, RYL, NVR, KBH, LENHome construction, sale, and financingAlso some deal in land acquisition and developmentIndustry 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 FinancingConstructs, sells, and finances homesDomestic marketAcquired Breland Homes (2012)2011 Revenue: $130 MQ2 2013 DHI Earnings26 April at 10:00 AM EasternDHI Company Profile

    Previous Close24.691 Year Target Price24.00 26.0052 Week Range14.37 25.56Average Volume (3M)6.02 MMarket Cap.$7.06 BP/E (ttm)8.49EPS (ttm)2.8Dividend and Yield0.15 (0.60%)Beta1.27Employees3,500

  • DHI Price Chart

  • DHI vs S&P vs XHB

  • DHI Financials

  • Low numbers leading up to the housing crashRecovering numbers coinciding with the better housing numbersSales, revenue, net income, etc. are all expected to riseDHI Financials

  • Comparison to Industry

    CompanyMarket Cap.P/EPrice to Book Dividend (Yield)TD/TAROAROIROEProfit MarginDHI7.72 B8.492.100.15 (.64)34.415.218.530.821.96MDC1.77 B28.31.992.0 (2.78)42.23.33.577.045.21NVR4.95 B26.03.33023.28.2410.512.75.66RYL1.90 B52.03.640.12 (.30)58.72.412.908.813.24TOL5.70 B11.91.84036.58.6710.117.125.9PHM7.61 B36.83.4301153.033.461015.7KBH1.84 B5.110.14 (.46)67.3-2.32-2.5-15-3.8LEN7.97 B12.52.320.16 (.39)48.66.747.3421.916.01

  • SWOT Analysis

    Strengths Increase in Sales Order Backlogs Specialized Home BuildersIntegrated OperationsWeaknesses Weak Profitability IndicatorsBusiness Concentration: the United StatesOpportunities Rising Demand of Senior Housing in the United StatesGrowth Trends: Echo Boomer PopulationReal Estate Market Outlook: United StatesThreats Intense CompetitionStringent Government RegulationsGlobal Economic Scenario

  • We should own DHI because:Housing market still has much room to recoverDHI has good financials and can capitalize on the recoveryBeware of financial news indicating slowdownInvestment Thesis

  • Sector : Industrials and MaterialsIndustry Group: Residential ConstructionCurrent 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

    SectorTarget AllocationCurrent AllocationRemaining AllocationIndustrials6.19%5.77%0.4%Materials2.04%3.61%-1.6%

    **Business profile How does this company generate revenue? International vs. domestic Growth/earnings outlook Management quality Length of tenure doesnt equal experience or quality Is management shareholder friendly? Honest? Can they execute? Competitive landscape, product positioning Does company have a sustainable competitive advantage?**