Warren Buffett Stocks That Could Soar If the Fed Cuts Interest Rates
Kristin Levine
Posted On August 30, 2024
Warren Buffett’s Performance Amidst Rate Hikes
Despite the Federal Reserve’s interest rate hikes initiated in March 2022, Warren Buffett’s Berkshire Hathaway has outperformed the S&P 500. While Buffett anticipates lower rates, certain stocks within his portfolio are poised to excel with a Fed rate cut, especially in September.
Buffett’s Homebuilder Holdings
Buffett established positions in three housing stocks during Q2 2022, retaining stakes in Lennar and NVR after selling his D.R. Horton shares. Berkshire’s current holdings in Lennar amount to approximately $25.6 million, while its NVR shares are valued at $100 million.
Lennar and NVR: Interest Rate Sensitivity
Interest rate cuts are expected to have a positive impact on Lennar and NVR. Lower interest rates typically result in reduced mortgage rates, which in turn fuel increased demand for new home purchases.
Executive Outlook and Pent-Up Demand
Lennar’s executive chairman and co-CEO, Stuart Miller, expressed optimism about the company’s prospects in the event of interest rate cuts, stating that pent-up demand for new homes would be unleashed.
Federal Reserve’s Position on Rate Cuts
Federal Reserve Chairman Jerome Powell has indicated an increase in confidence that inflation is stabilizing towards the 2% target. This suggests that the Fed is likely to consider rate cuts in the near future.
Alternative Catalysts for Lennar and NVR
Even if the Fed does not implement rate cuts in September, Lennar and NVR are positioned to benefit from other factors. The upcoming presidential election and Kamala Harris’ proposed housing policies could stimulate demand for new homes. Additionally, the chronic housing shortage in the U.S. continues to drive growth for homebuilders.
Motley Fool Stock Advisor Recommendation
It is important to note that Lennar was not among the 10 best stocks identified by The Motley Fool’s Stock Advisor team. However, the service has delivered exceptional returns since 2002.
