Greg Abel Committed $6.8 Billion to Homebuilders Like Lennar, Increasing Berkshire's Stake by 30%, Even as Mortgage Rates Sit Near 7.5% and Builder Sentiment Hits Multi-Year Lows. Is This Bold Conviction or a Costly Miscalculation?

Lennar Corp. (LEN) shares fell 2.51% to $80.05 after Hunterbrook Media accused the company of selling 700 homes to its spinoff, Millrose Properties (MRP), to meet quarterly targets. The report claims these transactions helped Lennar meet delivery guidance but raised financial and governance concerns. Lennar has not yet commented.

Lennar ($LEN) sold over 700 homes to its spinoff Millrose ($MRP) in a month, helping meet its delivery forecast. Millrose, a REIT, is renting these homes, despite earlier claims it wouldn't. Lennar pays Millrose for land rights, and Millrose's largest shareholder is Lennar's CEO. The arrangement raises accounting and profitability concerns.

Lennar shares fell 5.0% after a Hunterbrook report raised concerns about its financial ties with Millrose Properties, citing potential conflicts of interest. Morgan Stanley initiated coverage with an Underweight rating and $65 price target, citing margin risks. Despite Berkshire Hathaway's recent investment, the stock traded near its 52-week low.

Lennar (LEN) shares dropped 2.9% after Hunterbrook raised concerns about its relationship with Millrose Properties, a land-bank company spun off by Lennar. Hunterbrook noted unusual home purchases by Millrose, including 356 in the final week of Lennar's fiscal quarter, totaling $200 million. Lennar beat one home-delivery target but missed four others. Millrose, which holds Lennar land, amended agreements to allow home purchases and rentals.

Morgan Stanley initiated coverage on Lennar with an Underweight rating and a $65 price target. Lennar shares rose 0.67% to $82.14, despite an 18.88% year-to-date decline. Berkshire Hathaway increased its stake to 10% ownership. Morgan Stanley cited concerns over Lennar's land-light strategy and margin pressures. Lennar's Q3 gross margin fell to 15.8%, and incentives were near 12.0%. Morgan Stanley also rated two other builders Underweight and Toll Brothers Overweight.

Berkshire Hathaway has built a $2.2B stake in Lennar Corp., becoming its largest shareholder. The conglomerate bought $53.9M of Lennar shares in late September, now owning 11% of the homebuilder. Lennar's stock has fallen 21% YTD due to industry challenges, but Berkshire's investment signals long-term confidence in the housing market and Lennar's strategy.