In this article we will take a look at whether hedge funds think Toll Brothers Inc (NYSE:TOL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is TOL stock a buy? Toll Brothers Inc (NYSE:TOL) investors should be aware of a decrease in hedge fund interest lately. Toll Brothers Inc (NYSE:TOL) was in 34 hedge funds’ portfolios at the end of December. The all time high for this statistic is 39. Our calculations also showed that TOL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Matthew Lindenbaum of Basswood Capital
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Do Hedge Funds Think TOL Is A Good Stock To Buy Now?
At the end of December, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TOL over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Greenhaven Associates held the most valuable stake in Toll Brothers Inc (NYSE:TOL), which was worth $232.9 million at the end of the fourth quarter. On the second spot was Eminence Capital which amassed $120.6 million worth of shares. Echo Street Capital Management, Prana Capital Management, and Basswood Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Toll Brothers Inc (NYSE:TOL), around 4.39% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 2.96 percent of its 13F equity portfolio to TOL.
Due to the fact that Toll Brothers Inc (NYSE:TOL) has faced bearish sentiment from the smart money, it’s safe to say that there were a few fund managers that decided to sell off their full holdings by the end of the fourth quarter. Interestingly, Patrick Degorce’s Theleme Partners dumped the largest investment of the 750 funds monitored by Insider Monkey, worth about $24.6 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $16.9 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds by the end of the fourth quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Toll Brothers Inc (NYSE:TOL). These stocks are FireEye Inc (NASDAQ:FEYE), Tenable Holdings, Inc. (NASDAQ:TENB), Envista Holdings Corporation (NYSE:NVST), Enel Chile S.A. (NYSE:ENIC), Coty Inc (NYSE:COTY), TriNet Group Inc (NYSE:TNET), and Healthequity Inc (NASDAQ:HQY). This group of stocks’ market valuations are similar to TOL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FEYE | 31 | 314317 | 3 |
| TENB | 39 | 901500 | 9 |
| NVST | 33 | 801088 | 13 |
| ENIC | 7 | 22302 | 3 |
| COTY | 22 | 316463 | -4 |
| TNET | 21 | 438322 | -5 |
| HQY | 20 | 241668 | -4 |
| Average | 24.7 | 433666 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $580 million in TOL’s case. Tenable Holdings, Inc. (NASDAQ:TENB) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 7 bullish hedge fund positions. Toll Brothers Inc (NYSE:TOL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TOL is 68.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on TOL as the stock returned 36.1% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
