Hennessy Japan Fund on Sekisui House
Thesis
Sekisui House is positioned to benefit from the structural shortage of single-family housing in the United States, driven by sustained household formation and years of underbuilding following the global financial crisis. The company's acquisition of M.D.C. Holdings demonstrates its commitment to expanding its presence in the American housing market. The managers believe Japanese homebuilders can gain market share through superior construction efficiency, prefabrication capabilities, housing quality, and financial resources. These advantages could allow Sekisui House to strengthen its competitive position beyond a cyclical recovery in housing demand. The managers consider the combination of long-term housing demand, market-share expansion, attractive valuations, and shareholder distributions a compelling investment opportunity.
“Recent acquisitions, including Sekisui House’s purchase of M.D.C. Holdings”
Key risks
- Elevated U.S. mortgage rates remain a near-term headwind for housing demand.
- The timing of a recovery in U.S. residential construction remains uncertain.
- Currency fluctuations can affect reported earnings for Japanese companies with international operations.
- Higher input costs and changing economic conditions could pressure construction economics.