In Warren Buffett’s Berkshire Hathaway’s (NYSE:) latest SEC disclosures, the company reported buying a nearly $1 billion stake in homebuilders Lennar (NYSE:) and DR Horton (NYSE:).
The purchases signal anticipation of a housing market rebound, possibly piqued by the possibility of the Fed starting a regime. However, while Buffett appears confident of the new home construction industry, homebuilder confidence is weakening.
Monday’s NAHB homebuilder sentiment index fell to 32, matching its lowest level since December 2022. While mortgage rates have retreated slightly, homebuyers are not biting. Higher prices and relatively high mortgage rates are leading to a dearth of buyers.
Additionally, factor in poor consumer confidence, and it’s not surprising that many potential buyers are sitting on the sidelines. If the labor trends continue to weaken, we should expect the sentiment from potential buyers and homebuilders to remain poor.
Warren Buffett and his team at Berkshire have proven to be savvy investors. While they are often early to a trend, they are more often than not proven correct over time. Is Buffett making a smart bet, or might the homebuilder sentiment gauge warn of continued tough times ahead?
SoftBank Follows Uncle Sam And Takes A Stake In Intel
On Monday night, SoftBank (TYO:) announced it will be making a $2 billion investment in Intel (NASDAQ:). The move follows the recent announcement by President Trump that the US government may buy 10% of Intel shares. The news that SoftBank would buy the stock at $23 a share sent the price up over 5% to nearly $25 in pre-market trading.
The following quote from Masayoshi Son, Chairman and CEO of SoftBank, helps appreciate their investment rationale:
Semiconductors are the foundation of every industry. For more than 50 years, Intel has been a trusted leader in innovation. This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role.
The question Intel investors should consider is whether SoftBank invested for political purposes. In other words, trying to get on President Trump’s good side for future favor. Or is Intel a legitimate piece of their AI portfolio, which includes stakes in Nvidia (NASDAQ:) and Taiwan Semiconductor, among others? Below, we share two quotes from investment analysts to help appreciate both arguments.
Aaron Rakers, Wells Fargo (NYSE:): We think the positive move in INTC post this announcement is justified as we think investors would consider this to reflect a vote of confidence in INTC’s long-term transformation efforts, which includes the company’s focus on improving its balance sheet positioning.
Amir Anvarzadeh, Asymmetric Advisors: SoftBank’s investment helps, but it is not what is going to move the dial for Intel. It’s more to maintain this very good relationship he has with Trump
As we share below, Intel shares are down nearly 65% from their 2019 highs and have been oscillating between $20 and $28 for the last year. While the SoftBank purchase is good news for shareholders, the stock still has a long way to go for longer-term investors to recoup their investments.