Baron Funds, an investment management company, released its “Baron Real Estate Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. The fund had a strong performance in 2023 and generated a gain of 25.04% (Institutional Shares). This is more than double the MSCI US REIT Index (the REIT Index), which rose 12.27% and also outperformed the MSCI USA IMI Extended Real Estate Index’s 23.09% return. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Real Estate Fund featured stocks such as Lennar Corporation (NYSE:LEN) in its Q4 2023 investor letter. Based in Miami, Florida, Lennar Corporation (NYSE:LEN) operates as a home builder. On January 22, 2024, Lennar Corporation (NYSE:LEN) stock closed at $155.27 per share. One-month return of Lennar Corporation (NYSE:LEN) was 4.43%, and its shares gained 56.19% of their value over the last 52 weeks. Lennar Corporation (NYSE:LEN) has a market capitalization of $43.718 billion.
Baron Real Estate Fund stated the following regarding Lennar Corporation (NYSE:LEN) in its fourth quarter 2023 investor letter:
“The share prices of our investments in homebuilder companies – Toll Brothers, Inc., D.R. Horton, Inc., and Lennar Corporation (NYSE:LEN) – gained 39.4%, 41.8%, and 33.2%, respectively, in the most recent quarter, in part due to the continuation of strong quarterly business results, management optimism about 2024 prospects, and a more than 100 basis point decline in 30-year mortgage rates during the quarter.
2023 was an excellent year for the public homebuilders. Housing fundamentals were resilient despite the affordability challenges of elevated mortgage rates and home prices. Several years of pent-up demand, fears that mortgage rates could move higher, a dearth of inventory in the existing home market, and an overall housing supply shortage drove home buyers off the sidelines to “stretch their wallet,” in part due to fears that they could miss out on the opportunity to buy a home. The Fund’s homebuilding companies Toll Brothers, D.R. Horton, and Lennar increased 108.0%, 71.4%, and 66.3%, respectively, in 2023.
Though we anticipate more modest gains for the Fund’s homebuilder investments in 2024, we remain optimistic about the long-term prospects for Toll Brothers, D.R. Horton, and Lennar. Further, we continue to believe there is a compelling case for the homebuilder valuations to re-rate higher over time.
Since the beginning of 2020, D.R. Horton, Lennar, and Toll Brothers have demonstrated substantial resilience and operating prowess. Despite several black swan events – COVID-19, a sharp increase in mortgage rates from 3% to 8%, and supply-chain disruptions – each company has managed its business exceptionally well and demonstrated that the demand to buy homes is resilient.”
A builder wearing a hard hat admiring a newly constructed smart home.
Lennar Corporation (NYSE:LEN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held Lennar Corporation (NYSE:LEN) at the end of third quarter which was 66 in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.