Baron Funds, an investment management company, released its “Baron Real Estate Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund declined 9.20% (Institutional Shares) in the second quarter compared to a 0.22% decline for the MSCI US REIT Index (the REIT Index) and a 4.03% decline for the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index). Some of the Fund’s top performers from 2023 and the first quarter of 2024 experienced declines, partly due to concerns about slowing growth. This includes the shares of homebuilders, residential building product and services companies, casino and gaming operators, certain REITs, and other real estate-related companies. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Real Estate Fund highlighted stocks like Toll Brothers, Inc. (NYSE:TOL), in the second quarter 2024 investor letter. Toll Brothers, Inc. (NYSE:TOL) designs, builds, markets, and arranges finance for detached and attached homes in residential communities. The one-month return of Toll Brothers, Inc. (NYSE:TOL) was 2.86%, and its shares gained 73.67% of their value over the last 52 weeks. On August 29, 2024, Toll Brothers, Inc. (NYSE:TOL) stock closed at $142.29 per share with a market capitalization of $14.363 billion.
Baron Real Estate Fund stated the following regarding Toll Brothers, Inc. (NYSE:TOL) in its Q2 2024 investor letter:
“We trimmed our position in Toll Brothers, Inc. (NYSE:TOL), America’s leading luxury homebuilder, during the second quarter following exceptionally strong share price appreciation over the last year and the Fund’s resulting large position size. Toll Brothers remains the largest position in the Fund, and we continue to be enthusiastic about the company’s long-term prospects.
Our meetings with CEO Doug Yearley and other key members of the company’s management confirm our view that the long-term prospects remain compelling. We believe Toll Brothers has the ability to grow its community count of homes by approximately 10% per year as the company continues to gain market share against its mostly smaller private competitors who lack scale advantages, brand awareness, and access to attractively priced financing. Further, Toll Brothers has a long runway for multi-decade growth as it targets the fastest growing income demographic in the U.S. – 16 million households with annual incomes of at least $200,000. According to the U.S. Census Bureau (September 2023), households with over $200,000 in annual income have grown approximately 10 times faster than all U.S. households in the last 10 years. Currently, Toll Brothers has captured only 0.06% of this important demographic group. For additional reasons we remain optimistic on our investment in Toll Brothers, please see the “Top contributors” section of our first quarter 2024 shareholder letter.”
A team of architects meeting around a blueprint to discuss the design of a high-end apartment rental.
Toll Brothers, Inc. (NYSE:TOL) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held Toll Brothers, Inc. (NYSE:TOL) at the end of the second quarter which was 54 in the previous quarter. Toll Brothers, Inc. (NYSE:TOL) reported a strong third quarter, delivering 2,814 homes at an average price of $968,000 setting a record for home sale revenues at $2.72 billion. While we acknowledge the potential of Toll Brothers, Inc. (NYSE:TOL) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Toll Brothers, Inc. (NYSE:TOL) and shared the list of best housing stocks to buy according to hedge funds. Toll Brothers, Inc.’s (NYSE:TOL) 26.1% appreciation in the previous quarter positively impacted Baron Real Estate Fund’s performance. In addition, please check out our hedge fund investor letters Q2 2024 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.
