We recently published a list of 10 Best Residential Construction Stocks to Buy. In this article, we are going to take a look at where Toll Brothers, Inc. (NYSE:TOL) stands against other best residential construction stocks to buy.
News from the US Residential Construction
On February 18, Reuters reported that the US homebuilder sentiment dropped to a five-month low in February. While new home construction is heavily dependent on imported materials such as lumber, there are concerns regarding tariffs on imports as well as higher mortgage rates further bringing housing costs higher. NAHB Chief Economist Robert Dietz reiterated the concerns, stating
“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs”
Sheryl Palmer, Taylor Morrison CEO, joined CNBC’s ‘Closing Bell Overtime’ to shed light on the housing market amidst weak builder confidence and slowing activity. According to her, the first-time buyer is still stretched. Regarding tariffs, she deemed the situation still uncertain but referred to them as something that will have an impact and will be ‘unfortunate’ since affordability is stretched and this certainly won’t help.
Previously, Ivy Zelman, Zelman and Associates Executive Vice President appeared on CNBC, saying the spring selling season is not yet a disaster but is off to a soft start. Alongside, the risk of inflation from tariffs and the deportation risk which is a concern for construction workers could put more inflation in labor is there. Simultaneously, builders do not have pricing power and hence, they are resorting to offering concessions.
Our Methodology
In order to compile a list of the 10 best residential construction stocks to buy, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best residential construction stocks to buy have been arranged in ascending order of their hedge fund holders, as of Q4 2024.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A team of architects meeting around a blueprint to discuss the design of a high-end apartment rental.
Toll Brothers, Inc. (NYSE:TOL)
Number of Hedge Fund Holders: 64
Toll Brothers, Inc. (NYSE:TOL) was founded in southeastern Pennsylvania in 1967 by the brothers Bob and Bruce. The firm expanded across the United States over the years and emerged as America’s luxury home builder. Currently, Toll Brothers operates in 24 states and more than 60 markets nationwide.
Toll Brothers, Inc. (NYSE:TOL) is in a good spot with its widespread national footprint positioning it for growth, featuring the widest offering of luxury homes, and catering to the most affluent customers in its industry. The Toll Brothers advantage setting the homebuilder apart comes from the prestigious and desirable locations it chooses to build in, the distinctive architecture of a Toll Brothers home, unrivaled choice, and exceptional customer service.
For FY 2025’s first quarter, Toll Brothers delivered 1,991 homes and generated home sales revenues of $1.84 billion. The homebuilder signed 2,307 net contracts in its first quarter, up 13% in units when compared to the prior year’s first quarter. Demand was robust in the firm’s North and Mid-Atlantic regions in the first quarter, from Boston to Atlanta, and Dallas, Houston, Denver, Boise, Las Vegas, and California. Regarding the spring selling season, the homebuilder witnessed mixed results, with healthy demand in many of its markets especially at the higher end, while affordability constraints and more inventories in some markets pressured sales at the lower end.
Overall, TOL ranks 2nd on our list of best residential construction stocks to buy. While we acknowledge the potential of TOL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TOL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
