Warren Buffett's Berkshire Hathaway Just Loaded Up on This Dividend King Stock. Is It a No-Brainer Buy?
Key Points
Berkshire Hathaway already owns a group of housing-related operating businesses.
A new investment in one Dividend King is also a bet on U.S. housing and construction.
Buffett has often touted the strength of the U.S. economy over the long term.
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Those who follow billionaire investor Warren Buffett have been wondering what he and his investing chiefs have been buying in recent months. Normally, Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) files a quarterly Form 13F along with other large investors, to keep its portfolio moves up to date for the public.
But Buffett requested -- and received -- permission to keep some new investments secret in the first quarter as it built up its positions. Those "mystery stocks" have now been revealed, and it looks like Buffett and Berkshire are now betting on a housing recovery.
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Berkshire has long been invested in the housing sector. Now, it has disclosed an almost 3% stake in one stock that would greatly benefit from a thriving housing and construction market. The investment in this Dividend King might interest both income and growth investors.
Image source: The Motley Fool.
Berkshire's mystery stocks revealed
Nearly two-thirds of the money invested by Berkshire for the undisclosed stocks in the first quarter went into steelmaker Nucor (NYSE: NUE). The balance of the more than $1.1 billion went into homebuilders Lennar and D.R. Horton. Berkshire continued to add Nucor shares in the second quarter, with its total investment in Nucor valued at about $857 million as of the end of Q2.
To be clear, these bets on housing may not have come from Buffett himself. He has handed more investing responsibility to his lieutenants Todd Combs and Ted Weschler in recent years. Buffett will be stepping down as Berkshire's CEO at the end of this year.
But it wouldn't be surprising if Buffett was involved with these purchases as he has accumulated a group of housing-related operating businesses over the years that are now Berkshire subsidiaries. They include:
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Clayton Homes: One of the largest builders of manufactured and modular homes in the U.S.
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Shaw Industries: Manufacturer of flooring products, including carpet, hardwood, and laminate.
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Benjamin Moore: Premium paint manufacturer and retailer.
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Johns Manville: Provider of insulation and commercial roofing materials.
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MiTek: Maker of steel truss plates that also provides engineering software and services for the building components industry.
Nucor is a fit for Berkshire
Steelmaker Nucor is a supplier to some of these companies. Additionally, Nucor has a joint venture partnership with Japanese conglomerate Mitsui, which owns steel processor Steel Technologies. Buffett also famously has a large investment in Mitsui along with other Japanese investments.
But Buffett's main focus has been on American companies. In his 2024 annual letter to shareholders, Buffett stated: "I have depended on the success of American businesses and I will continue to do so." Nucor fits the bill as the largest steel and steel products company in North America.
Income and growth from a Dividend King
Nucor stock has been on the rise, and Berkshire's 6.6 million shares are now worth almost $1 billion. That comes as Nucor's significant investments in its own business begin to generate cash for the company. Nucor has poured more than $15 billion in capital spending into acquisitions and growth investments since 2017.
In its second-quarter conference call, Nucor CFO Steve Laxton told investors that "we expect a dramatic change in free cash flow profile in the back half of the year compared with the first half of the year." That change comes from several of its investments ramping up production toward full capacity. That adds revenue and allows capital spending to decrease.
Nucor also gives investors a steady and growing income stream. 2025 will be its 53rd consecutive year with an increasing dividend, should it announce another toward the end of the year as expected. That puts it into the elite club of Dividend Kings.
Its cash flow is also helping support capital returns to shareholders in the form of share repurchases. Nucor has reduced its shares outstanding by nearly 25% in the last five years.
Like many names in the industrial and materials sectors, Nucor is a cyclical stock. Buying it at the right point of those cycles can be difficult. It seems Warren Buffett and Berkshire Hathaway believe the housing and construction markets may be ready to rebound. That makes now a good time to follow Berkshire's investment into Nucor today.
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Howard Smith has positions in Berkshire Hathaway and Nucor. The Motley Fool has positions in and recommends Berkshire Hathaway, D.R. Horton, and Lennar. The Motley Fool has a disclosure policy.
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