HomeMarket NewsForecasting 2025: Two Warren Buffett Stocks Set for Significant Growth

Forecasting 2025: Two Warren Buffett Stocks Set for Significant Growth

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Warren Buffett’s Stock Picks: Two Homebuilders Set to Benefit from Market Changes

Warren Buffett is rightly known as the greatest investor of all time.

His company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), is now worth roughly $1 trillion, thanks to little more than Buffett’s investing acumen. Berkshire is one of the most valuable companies in the world, not because of a blockbuster product or dominance of a certain industry, but because of Buffett’s ability to make market-beating investments — both in Berkshire’s stock portfolio and its wholly owned subsidiaries.

It’s no surprise that the 94-year-old’s investment strategies are closely monitored by millions. Currently, Berkshire manages a streamlined portfolio of 39 stocks and exchange-traded funds (ETFs), emphasizing that it’s wise to follow Buffett’s stock choices.

In recent years, Berkshire has invested in several homebuilders and housing-related stocks. These decisions appear poised to pay off as the housing market is predicted to recover next year. With the Federal Reserve cutting interest rates, mortgage rates should decline, potentially reviving home buying. Presently, existing home sales have fallen by 40% from pre-pandemic levels.

Keep reading to explore two Warren Buffett stocks that may benefit from this trend as we move into next year.

Warren Buffett at a conference.

Image source: The Motley Fool.

1. NVR: A Leader in Homebuilding

NVR (NYSE: NVR) is often hailed as a top-tier homebuilder stock. Over the past 30 years, the stock has soared an astounding 175,000%, turning a $1,000 investment into $1.75 million.

The company operates under notable brands like Ryan Homes, NVHomes, Fox Ridge Homes, and Heartland Homes. Its business spans 16 states, primarily in the eastern U.S., and Washington, D.C. NVR’s conservative approach during downturns sets it apart from competitors as it employs a different business model.

Instead of acquiring land outright, which carries risk, NVR adopts an asset-light strategy centered on lot purchase agreements. This method allows it to control lots while minimizing liquidity risk.

This strategy has allowed NVR to better navigate the volatile homebuilding market. With a national housing shortage estimated in the millions of homes, NVR has significant growth opportunities, especially as housing affordability and the lack of affordable options become major topics in upcoming elections.

Though recent growth has been tempered by challenges in the housing sector, including elevated mortgage rates, the easing of these rates could trigger increased home buying, benefitting an experienced company like NVR.

Currently, the stock has a price-to-earnings (P/E) ratio of 20, positioning it well to capitalize on a potential housing market upswing.

2. Louisiana-Pacific: Capitalizing on Construction Needs

Another attractive Buffett stock in the housing sector is Louisiana-Pacific (NYSE: LPX). It stands as the world’s leading producer of oriented strand board (OSB), a type of engineered wood product similar to particle board.

The company produces essential materials such as siding, sub-flooring, and sheathing. Like NVR, Louisiana-Pacific is expected to benefit from renewed home construction activity. It should also gain from home renovation projects, which are likely to rebound as interest rates decrease, and Americans increasingly tap into record-high home equity, hitting $35 trillion by the second quarter.

Falling interest rates on home equity loans will facilitate access to this wealth, even among those who aren’t planning to move.

Demand for Louisiana-Pacific’s offerings is already robust, with siding sales jumping 30% to $415 million in Q2, and OSB sales climbing 53% to $351 million.

The company’s net income has also improved significantly, posting a profit of $160 million compared to a loss of $21 million a year earlier. With positive guidance ahead, Louisiana-Pacific looks set to thrive as market conditions improve.

A Potentially Lucrative Investment Opportunity

Have you ever felt you missed out on great investment opportunities? If so, you might want to pay attention now.

Occasionally, our expert analysts issue a “Double Down” stock recommendation, targeting companies they believe are about to see substantial gains. If you’re concerned about having missed your chance to invest, now may be the best time to get in before it’s too late. The data backs this up:

  • Amazon: If you invested $1,000 when we first recommended it in 2010, you’d have $21,266!*
  • Apple: An investment of $1,000 in 2008 would have grown to $43,047!*
  • Netflix: A $1,000 investment in 2004 would now stand at $389,794!*

Currently, we are issuing “Double Down” alerts for three outstanding companies — an opportunity you won’t want to miss.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and NVR. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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