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We highlight a few stock write-ups from the latest Weekly Inspiration:
Lennar (NYSE: LEN) builds a house in 116 days, about half the time it took in early 2023, at ~$80 a square foot, 14% below its Q4 FY23 cost. Our Business Intelligence coverage initiation rates the Class A shares Long-Term Overweight against the S&P 500 over three to five years. The operating gains have not reached the margin: gross margin on home sales fell from 27.5% in FY22 to 15.8% in Q3 FY26 (Jun-Aug 2026), below the ~17% at which Lennar earns its cost of capital, and Stuart Miller put the whole gap on land: “It’s not labor. It’s not materials. It’s not overhead. It is land.” Incentives fell for a third quarter, to 12.0% of price, but the cost ratio rose from 0.735 to 0.741 as option fees from the land banks that supply 86% of deliveries run through the cost of homes sold. Our base case recovers the margin through falling incentives alone, with no credit for cheaper building, and values a share at $112.93 to $148.86 at a fixed 10% required return, median $130.67, against the $74.92 close of October 13; we set no price target. Berkshire Hathaway held ~12.2% of the shares by its October 5 Form 4 and Greenhaven 5.08% of the Class A. Five kill criteria include a margin below 15.5% for four quarters while deliveries fall, and buybacks funded with debt. The Q4 guide implies the first annual fall in deliveries since 2011; D.R. Horton reports October 29, Lennar in mid-December.
Flowers Foods (NYSE: FLO), the second-largest US packaged bakery producer and owner of Nature’s Own, Dave’s Killer Bread and Wonder, trades at ~7.5x earnings and 6.4x EBITDA on the guidance it cut in August, after an 80% fall from its 2022 high. The reasons for the fall are plain. Branded share of the $32 billion fresh-bakery category slipped from 77% in FY21 to under 74% in FY25 as a $2.66 store-brand loaf undercut Nature’s Own at $3.76 and Dave’s Killer Bread at $6.20; the $795 million Simple Mills purchase at 3.3x revenue pushed leverage to 3.3x, now 3.6x; and the dividend was halved in May. Mid-point 2026 guidance has sales down 3%, EBITDA down 13% and EPS down 27%. Value Don’t Lie, which holds no position, still sees three attractions: the shares are among the cheapest in packaged food, the dividend cut is behind the company, and Flowers is reportedly shopping Tastykake, which Reuters valued at ~$350 million on $400 million of revenue. On 214 million shares the market value is $1.28 billion against $1.64 billion of net debt. An upside case with the Tastykake sale and six quarters of excess cash flow gives $8.50 a share, 42% up; a downside with 2027 EBITDA at $430 million and a 5.5x multiple gives $3.80. The stock goes on a watch list: a Tastykake sale, a further dividend cut or easing volume declines by the Q4 report in February 2027 would change the view, and without them the write-up passes.