Prediction: These 4 Warren Buffett Stocks Will Be Big Winners If the Fed Cuts Rates on Sept. 17

Key Points

• Four housing stocks in Buffett's Berkshire Hathaway portfolio could benefit from rate cuts.

• Buffett bought three of the four stocks in the second quarter of 2025.

• 10 stocks we like better than D.R. Horton ›

Will they or won't they? The "they" in this question is the members of the Federal Open Market Committee (FOMC) of the Federal Reserve. The question itself relates to whether or not an interest rate cut will be announced after the FOMC's meeting next week.

I won't speculate about what the decision will be. However, I will make a prediction: Four stocks owned by Warren Buffett will be big winners if the Fed indeed cuts rates on Sept. 17.

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Birds of a feather

Actually, I suspect that quite a few stocks in Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) portfolio could enjoy a nice bump if the Fed cuts interest rates. My hunch, though, is that some "birds of a feather" among Berkshire's holdings will be especially big beneficiaries of a rate cut: D.R. Horton (NYSE: DHI), Lennar (NYSE: LEN) (NYSE: LEN.B), and NVR (NYSE: NVR).

D.R. Horton ranks as the largest homebuilder in the U.S. based on volume, a distinction it's held for more than 20 years. The company operates in 126 markets in 36 states. It builds and sells single-family homes and multi-family rental properties, as well as providing mortgage financing and title agency services. D.R. Horton also owns a majority stake in residential lot development company Forestar Group (NYSE: FOR).

Lennar's business model is similar to D.R. Horton's. The company focuses on building affordable single-family homes and multi-family rental properties. Its financial services segment provides mortgage financing, title, and closing services, mainly for buyers of homes built by Lennar. Note that Lennar has two share classes -- and Berkshire owns both of them, which makes the total number of Buffett stocks that could benefit from a rate cut four instead of three.

NVR is the smallest of these three homebuilders, with a market cap of around $24 billion. The company operates in 36 markets in 16 states. It sells single-family homes under three brands: Ryan Homes, NV Homes, and Heartland Homes. NVR also offers mortgage, settlement, and title services.

Why a Fed rate cut could boost these Buffett stocks

I think there are two ways that a Fed rate cut could provide a catalyst for D.R. Horton, Lennar, and NVR. Let's start with one that might not be overly obvious: Lower interest rates could boost consumer confidence.

Lennar CEO Stuart Little mentioned high interest rates several times during his company's second-quarter earnings conference call in June. Interestingly, Little pointed to waning consumer confidence as a more important issue. When consumer confidence is low, they're less likely to buy a new home.

The more obvious way that interest rate cuts help housing stocks is that mortgage loan rates should decline and spur more homebuyers to enter the market for a new home. To be sure, the process by which this happens is more complicated than it might seem.

Adjustable-rate mortgage rates are directly impacted by the Fed's moves. However, fixed mortgage rates are more heavily linked to 10-year U.S. Treasury rates than they are to the federal funds rate for overnight borrowing between banks that is set by the Fed.

But the 10-year Treasury rate could still fall over time if the FOMC announces a rate cut. One reason why is that the U.S. Treasury could take advantage of the lower rates and issue more short-term bonds to fund federal spending. This could, in turn, decrease the supply of longer-term bonds (e.g., 10-year Treasuries). The law of supply and demand would then kick in, causing the prices of these bonds to rise and their yields to fall. Voila -- lower 10-year Treasury rates.

The "Oracle of Omaha" strikes

Buffett bought 12 stocks in the second quarter of 2025. Included in the group were D.R. Horton, Lennar Class A, and Lennar Class B.

Did the "Oracle of Omaha" buy these stocks in anticipation of a Fed rate cut? I don't know. He's an astute observer of the economy, though. Perhaps Buffett did at least have a hunch that more rate cuts would be on the way that would help these homebuilders.

However, I suspect that he was, as he usually is, focused more on the long-term prospects for these stocks. With a continued housing shortage in the U.S., those prospects should be quite good, regardless of what the Fed does next week.

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Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, D.R. Horton, Lennar, and NVR. The Motley Fool has a disclosure policy.