Berkshire Hathaway Is Buying Up Shares of This Beaten-Down Stock. Should You Invest Too?

If someone who doesn't really follow the market or investing asked me to describe the investing strategy of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), the massively successful insurance and holding company built by Warren Buffett, I'd tell them just two things to remember.

First, Berkshire aims to be a long-term investor. Buffett famously said that "our favorite holding period is forever." And second, it prefers to buy companies it believes are temporarily undervalued by the rest of the investing universe. "Be greedy when others are fearful," Buffett also likes to say.

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And if I wanted to present an example of this strategy, Berkshire management -- now headed by new CEO Greg Abel -- just provided a perfect one: It boosted its position in homebuilder Lennar (NYSE: LEN).

Consider that the U.S. housing market is in rough shape. It has been struggling for years. A new report out from White House economists says the country has 10 million fewer houses than it needs, and there remain many obstacles to building more at a fast enough pace to remedy to problem. And recently, soaring mortgage rates have put new home purchases even further out of reach for a growing swath of Americans. The average 30-year mortgage rate has climbed to almost 7.3%, more than 1 percentage point higher than at the beginning of 2026 and well more than double what it was five years ago.

Homebuilder stocks are having a terrible year

All of this helps explain why homebuilder stocks are in the dumps this year -- including Lennar, which is down 20% so far in 2026 and off by 36% over the past 52 weeks. Clearly, most investors don't find this stock attractive. Analysts don't, either. Analysts' average 12-month price target for Lennar is $80, more than $2 below the current price. And of the 19 analysts who follow the stock (as tracked by Yahoo! Finance), 17 rate it a hold, underperform, or sell. Just two rate it a buy.

So, Lennar is a beaten-down stock in a highly troubled industry. Yet in late September, Berkshire Hathaway sank another $53.9 million into Lennar shares, bringing its stake to $2.2 billion, or 11% of the homebuilder. That's just behind the 11.2% stake held by investment giant Vanguard. That's on top of Berkshire's recent $6.8 billion acquisition of homebuilder Taylor Morrison, a deal it closed in July.

Clearly, Berkshire sees Lennar as undervalued by the market and took advantage of a lower share price to boost its stake in the company. It also appears that Berkshire is betting on the housing industry while conditions in it remain fraught. And it makes sense. The unaffordability of housing for average Americans is a huge problem, one that politicians and policymakers are eager to address. (This summer, Congress passed a bipartisan bill that aims to make it easier to build and finance housing.)

It may take a while, but I believe the housing industry will eventually rebound. Some investors don't have the resources or patience to wait for that rebound, but Berkshire does. I think ordinary retail investors should give this challenged industry a second look, too.

Matthew Benjamin has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and Lennar. The Motley Fool has a disclosure policy.