What Makes M/I Homes (MHO) an Attractive Long-Term Investment Opportunity?

Miller Value Partners, an investment management company, released its “Deep Value Strategy” fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the Deep Value Strategy was up 34%, compared to a 13.49% gain for the S&P 1500 Value Index. Investment in Value and cyclical stocks favored the strategy in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2022.

Miller Value Deep Value Strategy highlighted stocks M/I Homes, Inc. (NYSE:MHO) in the Q4 2022 investor letter. Based in Columbus, Ohio, M/I Homes, Inc. (NYSE:MHO) is a single-family home builder. On February 3, 2023, M/I Homes, Inc. (NYSE:MHO) stock closed at $61.91 per share. One-month return of M/I Homes, Inc. (NYSE:MHO) was 23.15%, and its shares gained 24.27% of their value over the last 52 weeks. M/I Homes, Inc. (NYSE:MHO) has a market capitalization of $1.698 billion.

Miller Value Deep Value Strategy made the following comment about M/I Homes, Inc. (NYSE:MHO) in its Q4 2022 investor letter:

“During the quarter, we initiated a new investment in M/I Homes, Inc. (NYSE:MHO), what we deem as a significantly misplaced homebuilder. M/I Homes’ share price is 40% below its recent highs, at valuation levels near/below 2008-09 and 2020 industry troughs. Homebuilders in general have been under pressure due to marketplace concerns on the potential impact from higher mortgage rates and lower housing affordability. However, we believe the positive demographics and lack of housing supply over the page 10 years provides a very favorable long-term supply/demand picture for the industry that should shorten the current downturn. M/I Homes is nicely diversified covering multiple home-type categories, with properties in valuable local communities in the Midwest and Southeast (#2 in the Jon Burns Real Estate Consulting Submarket Desirability Index). The company appears well positioned with a strong land portfolio and a backlog that remains higher than 2019 levels. M/I Homes also has a strong balance sheet, with net debt to capital near 25% and no debt maturities through 2028. With their strong backlog, management still sees potential for Return on Equity to remain above 20% which, if achieved, would lead to strong tangible book value growth over the next couple of years. With market expectations and valuation near historical troughs (EV/Revenue <.5x, EV/EBIT near 3x and deep discount to tangible book value), the  share price is already discounting a deep and extended industry trough. M/I Homes’ attractive asset base, strong balance sheet and deep valuation discount to peers should provide an attractive long-term reward/risk investment opportunity.”

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M/I Homes, Inc. (NYSE:MHO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held M/I Homes, Inc. (NYSE:MHO) at the end of the third quarter which was 23 in the previous quarter.

We discussed M/I Homes, Inc. (NYSE:MHO)  in another article and shared the list of extreme value stocks to buy. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.


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Disclosure: None. This article is originally published at Insider Monkey.