Value Stocks Episode 7 – NVR

by | Oct 15, 2018 | Value Stocks Podcasts Episodes | 0 comments

NVR stock analysis
Summary:
  • Well-managed homebuilder in the United States.
  • Growth will be more limited in the future compared to the last 20 years.
  • Stock still trading above intrinsic value.

Introduction

In this episode we discuss NVR (NYSE: NVR). NVR is a homebuilder that primarily earns its revenue from the eastern part of the United States. Currently NVR is trading around $2250 per share, down from a 52-week high of $3700. From the perspective of the authors this price decrease has closed the gap between the estimated intrinsic value of the company and hence is one of the reasons we decided to discuss this stock on the podcast. We hope you enjoy the episode.

Podcast Summary Notes

0:00 – Company Introduction

  • What do they do?
  • What is their market cap?
  • Do you own the stock?

2:15 – Why did you want to talk about this company?

  • Mentioned in the book “100 Baggers: Stocks that Return 100-to-1 and How to Find Them” by Chris Mayer
  • Popping up on a lot of value investors’ screens recently
  • All homebuilders have seen their stock drop off considerably
  • Frequently discussed among other value investors

4:05 – What do you like about the company?

  • Options on land
  • Double digit returns
  • Share buybacks
  • Long- and short-term performance

9:00 – What do you dislike about the company?

  • Cyclical
  • Revenue can go down considerably in short amount of time
  • Tough to determine where we are in the cycle
  • Current housing metrics
  • Current home ownership rates
  • Interest rates rising
  • A matter of when not a matter of if it will crash

16:20 – What are your thoughts on moat?

  • Low barrier of entry for new competitors
  • NVR has an advantage due to size

19:00 – What are your thoughts on growth, cash flow, and capital allocation?

  • Good history of buybacks
  • NVR is a very agile organization that is able to make money even with a large drop in their revenue
  • Growth will be limited in the future compared to the last 20 years

21:15 – Valuation/Intrinsic Value of the business

  • How did you calculate the intrinsic value?
  • Is it an above average business?

33:45 – Final thoughts on the business

Welcome to StockWriteUps.com!

My name is Alex Middleton and I am from Calgary, Alberta.  I believe investing requires one to carefully study publicly available information in an attempt to develop a thesis based on reason and logic.  It also requires one to properly account for the unknown by applying probabilities and margin of safety to their thesis.  I hope you enjoy the content!

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