We recently compiled a list of the Jim Cramer’s Game Plan This Week: 10 Stocks to Watch. In this article, we are going to take a look at where Toll Brothers, Inc. (NYSE:TOL) stands against the other stocks featured in Jim Cramer’s game plan for this week.
Jim Cramer, the host of Mad Money, recently discussed the current state of the market, touching on various factors including upcoming earnings reports and new inflation data. Reflecting on the November jobs report, which came in largely as expected, Cramer noted:
“After basically in line November jobs report, better than October, but with the unemployment rate still ticking up to 4.2%, I don’t think that does much to change the Federal Reserve’s rate cut calculus.”
On Friday, Cramer remarked that the market had a relatively calm session, with the Dow dipping by 123 points, the S&P gaining 0.25%, and the NASDAQ climbing 0.81%. He emphasized that nothing about Friday’s action surprised him, and he maintained his expectation for a 25-basis point rate cut later this month. Cramer added that he still anticipates the Fed will go ahead with this move despite the recent data.
READ ALSO Jim Cramer Discussed 10 Stocks That Can Do Well in December and Jim Cramer’s Lightning Round: 7 Stocks to Watch
Looking ahead, Cramer highlighted Wednesday’s upcoming release of the Consumer Price Index (CPI), which he noted could play a crucial role in the Fed’s decision-making. With the Federal Reserve meeting in just two weeks, he cautioned that there will be chatter about the Fed’s decision to cut rates.
“All of us still see high prices when we go to the supermarket, right? So we shouldn’t be surprised if the CPI comes in hot. At that point, why should the Fed really bother to cut? Be ready for that kind of chatter. Don’t worry, they’ll still cut.”
The following day, Thursday, will bring the release of the Producer Price Index (PPI), which Cramer pointed out is another important inflation measure. He again expressed concern that inflation needs to cool down in order to avoid complications. There has been ongoing speculation about whether the Fed could hesitate on rate cuts, which could derail the market’s expectations. Cramer remarked that if inflation remains elevated, the Fed might have no choice but to delay or even shelve rate cuts for next year.
“Bottom line: Look, I’m trying to get my arms around a market that takes up all sorts of crypto, lots of unprofitable companies, never too great a sign for those who want the Fed to cut repeatedly,” he said. “I want you to keep that in mind so you won’t be surprised if we get some overheated inflation numbers next week and the market gives up some of these extraordinary gains.”
Our Methodology
For this article, we compiled a list of 10 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 6. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
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 275% since May 2014, beating its benchmark by 150 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: 54
Cramer highlighted that Toll Brothers, Inc. (NYSE:TOL) stock initially rose after the Fed’s rate cut, but stalled as bond yields increased. He noted that once yields fell, the stock regained strength.
“Toll Brothers, high-end housing, reports Monday evening. When the Fed cut was announced, the stock flew up, but then it stalled because bond yields actually and surprisingly went higher. Given that mortgage rates are priced off the long end of the bond market, you can see why the stock struggled and then bond yields came down again and Toll’s been as strong as ever. Can it deliver on these numbers? Is lumber price too high? Well, we won’t have to wait too long to find out.”
Toll Brothers (NYSE:TOL) designs and builds luxury homes, including condominiums and single-story homes, and develops communities with various amenities. With favorable market conditions, such as ongoing demographic trends and a supply-demand imbalance in the housing market, the company remains optimistic about solid demand through the end of fiscal 2024 and into 2025.
While lower mortgage rates could stimulate the resale market, CEO Douglas Yearley Jr. pointed out that the supply of homes will continue to be constrained due to nearly 15 years of underproduction.
As a result of strong earnings in the third quarter, Toll Brothers (NYSE:TOL) has raised its full-year guidance for the third consecutive quarter. The company now expects to deliver between 10,650 and 10,750 homes for the year, with an average price of $975,000, marking a $10,000 increase from its previous projections.
Overall TOL ranks 4th on our list of the stocks featured in Jim Cramer’s game plan this week. While we acknowledge the potential of 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 more promising than TOL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
