Warren Buffett Says Housing Will Recover Soon (XHB, BRK-A, TOL, LEN, KBH)

Berkshire Hathway BRK CEO Warren Buffett is starting to get bullish on housing, saying he thinks it will turn around in a year or two. He also said that his trigger finger is itchy, and wants to make an acquisition. "Our elephant gun has been reloaded and my trigger finger is itchy," Buffett wrote in his annual letter to Berkshire Hathaway shareholders. Buffett said that, "Money will always flow toward opportunity, and there is an abundance of that in America." Hedge fund manager Jeff Matthews, author of Pilgrimage to Warren Buffett's Omaha said that Buffett's musings were not indicative of the market as a whole, however. "I don't think he's saying ‘the stock market is screamingly cheap and I want to get ready to go,'" Matthews says. "He's just staying, ‘we've got a ton of cash and we can do what we want.'" "A housing recovery will probably begin within a year or so. In any event, it is certain occur at some point," Buffett writes. Berkshire has made a few investments in housing related themes recently. MiTeck has had five "bolt-on acquisitions" in the past 11 months. Acme acquired the leading manufacturer of brick in Alabama at a cost of $50 million, Johns Manville is building a $55 million roofing membrane plant in Ohio, and Shaw has planned $200 million worth of spending this year on U.S.-based plant and equipment. If you believe that housing is going to turn around within the next year or two, it might be time to start moving into positions in housing related equities, notably homebuilders. Names like Toll Bros. TOL, Lennar LEN, KB Home KBH or the SPDR Homebuilders ETF XHB could be worth a look at these levels. Despite being well off their lows from the financial crisis, these names are nowhere near pre-recession levels, and could be strong investments over the next couple of years if you believe Buffett's thesis on the state of American housing.