Last week, I rounded out the list of signals I use to find potential investment opportunities.

This week, I want to explain how I used these signals to find Lennar (LEN) and then explain my thesis for it.

Back in late February 2025, my 52-week low screen lit up across the whole homebuilder sector — D.R. Horton, Lennar, Toll Brothers, the works. Not a company problem. An economy problem: high rates had choked off transaction volume, and pent-up demand was stacking up behind it.

It reminded me of Oil and Gas in 2020. Producers slashed capex, drilling collapsed, and when demand came back, supply couldn't — prices spiked. Homebuilders were doing the same thing: starts fell two years running, land purchases slowed, pipelines shrank. Less land optioned today means fewer homes in two or three years, no matter how demand recovers.

Lennar didn't play that game. While peers throttled back, it kept running at volume — deliveries up, community count up — paying for it with heavier incentives and margin compression. That's what makes Lennar the specific name, not just a sector bet: it's the one that didn't cut capacity, positioned to sell at scale right as the supply gap it didn't create finally bites.

Still, I thought this trade would live or die on interest rates, and my gut said rates weren't coming down soon. Getting in looked like catching a falling knife. So I forgot about it. No position.

Then Berkshire's 13F came out, and there it was: a position in Lennar. Berkshire first disclosed the stake in its February 17, 2026 filing — 7,050,950 shares. By the time the next 13F landed on May 15, 2026, they'd increased it 43%, to just over 10 million shares. That's my Smart Money signal, converging directly with the signals I'd already flagged. Two independent reads, same conclusion.

My first reaction was that I'd missed the boat — loud confirmations usually come with an opportunity that's already moved on. Except the price kept falling after the filing. The stock didn't rally on the news; it kept grinding lower. The opportunity wasn't stale. If anything it had gotten better while my conviction got stronger.

What really threw me was that I couldn't understand why Berkshire had bought. The rate uncertainty hadn't changed. What did they see that I hadn't?

Then I found it.

This thesis rests on three independent parts that join in a multiplicative nature.

First, there's a genuine housing supply shortage. Realtor.com's 2026 Housing Supply Gap Report puts the cumulative national deficit at 4.03 million homes as of 2025, up from 3.8 million in 2024 — the third-largest annual gap since 2012. Roughly 1.82 million millennial and Gen Z households were "missing" last year, unable to form a household because there's nowhere affordable to put them. Over a decade of underbuilding that construction still hasn't caught up to.

Second, the Fed is under pressure to cut interest rates. I can’t predict when it will happen, but it will eventually. That’s the nature of the business cycle.

Third, and the piece Berkshire's filing pointed me toward: Lennar's asset-light Millrose spinoff. Lennar spun off its land holdings into Millrose Properties and shifted to a just-in-time lot-option model instead of owning land outright. That's the same structural setup NVR has run for decades, and it's a big part of why NVR has always traded at a premium multiple to the rest of the homebuilders. If the transition holds, there's a real case for the market eventually re-rating Lennar toward that kind of multiple.

None of these alone is a great trade. Together, they're the reason I think this is a genuine opportunity.

The downside is limited for concrete reasons, not just optimism. Lennar closed fiscal 2025 with $3.4 billion in cash and $6.5 billion in total liquidity, homebuilding debt at just 15.7% of total capital, and bought back $2.7 billion in stock during the year. The land-light model is itself a cushion: owning just 2% of its land outright versus roughly 75% back in 2018 means Lennar isn't sitting on the write-down risk a land-heavy builder carries if the market keeps softening. This is a well-capitalized company trading below book value — 0.91x price-to-book — not a leveraged bet on a turnaround.

The real risk isn't that the thesis is wrong — it's that it's early. If the underlying logic holds and rates eventually normalize, Lennar likely goes up. What's in question is when. I don't know if that's six months away or three years away, and that uncertainty is the actual risk here. If the rate path stalls or drags out, this could be dead money for a long stretch. Capital parked in a position that isn't moving has a real cost — it drags down IRR even if the eventual outcome is exactly what I expect. Being right and being early can look identical to being wrong for a long time.

I still don't know where rates will be in the future. But I decided to start a small position and increase as signs looked positive.

My plan on the way up: trim half the position between $120–140 — a first checkpoint, not a final target, roughly where the stock topped out before this thesis existed. The remainder I'm holding toward $280–360, the range that reflects the full thesis.

Thesis-break conditions on the way down: rates climbing above 7.5% instead of toward 6%, unemployment above 5.5% (undercuts the demand side entirely), or two consecutive quarters of cut delivery guidance tied to demand deterioration beyond what the housing shortage thesis already accounts for — not simply attributable to elevated rates. Any of those and I'm out, not just trimming.

The next real checkpoint is rate direction — mortgage rates working back toward 6%, tariff pressure on materials rolling off, and confirmation the Fed is actually on a cutting path rather than just talking about one. That's the unlock for the housing side. On the company side, I'm watching the next couple of earnings prints for whether the Millrose transition is actually translating into the numbers. Until both show up, this is a position that requires patience, not vindication.

Three independent signals — sector screen, 52-week low, Berkshire's 13F — pointed at the same name. Underneath them, a real thesis: a housing market that's been structurally underbuilt for over a decade, a Fed that's eventually going to ease, and a company that didn't cut capacity while its peers did and is quietly transforming into a higher-multiple business in the process. I don't know when the catalyst hits. But I know what I'm watching for, I know where I'm wrong, and for now, my small position is enough to hold me accountable to the process.