This is Matt Reustle. Today, we are breaking down D.R. Horton, America’s largest homebuilder. Our guest is Ed Wachenheim, Founder of Greenhaven Associates. Ed takes us through an incredible discussion of D.R. Horton and homebuilders broadly, including how much has changed with this business model over the years.

Ed shares countless entertaining stories with the management teams and backs it all up with the numbers behind this business. It's an excellent conversation and an excellent glimpse at how someone like Ed approaches investments. Please enjoy this breakdown of D.R. Horton.

Ed’s Book: Common Stocks and Common Sense

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Show Notes

(00:00:00) Welcome to Business Breakdowns

(00:04:33) First Question - Understanding the Home Building Business Model

(00:06:56) Evolution of the Home Building Industry

(00:09:41) The Impact of Land Ownership on Home Builders

(00:14:29) A Transformation of the Home Building Business Model

(00:17:35) Unique Characteristics of D.R. Horton

(00:24:16) The Geographic Concentration of Home Builders

(00:25:59) Current State and Future of the Home Building Industry

(00:33:44) The Resilience of the Home Building Industry

(00:34:56) Efficiencies and Margins in Home Building

(00:37:02) Forecasting Revenue Growth in the Home Building Industry

(00:40:04) Comparing D.R. Horton vs. NVR

(00:41:23) The Valuation Gap in the Home Building Industry

(00:57:05) The Shift Towards Institutional Ownership in Home Building

(00:58:13) Impact of Interest Rates on Home Building

(01:02:09) Lessons from Evaluating D.R. Horton