Hedge Funds Are Betting On Toll Brothers Inc (TOL)

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Is Toll Brothers Inc (NYSE:TOL) undervalued? Money managers are getting more bullish. The number of long hedge fund positions increased by 1 lately. Toll Brothers Inc (NYSE:TOL) was in 34 hedge funds’ portfolios at the end of the third quarter of 2015. There were 33 hedge funds in our database with Toll Brothers Inc (NYSE:TOL) holdings at the end of the previous quarter. At the end of this article, we will also compare Toll Brothers Inc (NYSE:TOL) to other stocks, including Cadence Design Systems Inc (NASDAQ:CDNS), Middleby Corporation (NASDAQ:MIDD), and UGI Corp (NYSE:UGI) to get a better sense of its popularity.

To most stock holders, hedge funds are viewed as worthless, old investment tools of the past. While there are more than 8000 funds with their doors open at present, We look at the bigwigs of this group, around 700 funds. Most estimates calculate that this group of people administers most of the hedge fund industry’s total asset base, and by shadowing their finest picks, Insider Monkey has spotted a few investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s take a gander at the key action encompassing Toll Brothers Inc (NYSE:TOL).

What have hedge funds been doing with Toll Brothers Inc (NYSE:TOL)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Heebner’s Capital Growth Management has the number one position in Toll Brothers Inc (NYSE:TOL), worth close to $215.7 million, comprising 7% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $128.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism contain Dmitry Balyasny’s Balyasny Asset Management, David Harding’s Winton Capital Management, and Bruce Kovner’s Caxton Associates LP.