We recently published an article titled Greenhaven Associates: Top 10 Stocks to Invest in. In this article, we are going to take a look at where Toll Brothers, Inc. (NYSE:TOL) stands against the other stocks.
Edgar “Ed” Wachenheim III is the founder, CEO, and chairman of Greenhaven Associates, a hedge fund management company that manages over $7 billion in investments. He serves as the vice chairman of the board of Central National-Gottesman, the chairman of WNET’s board, a trustee at the Museum of Modern Art, and a life trustee who previously chaired both the executive and investment committees of the New York Public Library. Additionally, he is a trustee emeritus and former vice chair at Skidmore College, as well as a trustee emeritus and past board president of Rye Country Day School. A notable figure in the investment community, Ed’s most recent, prominent achievement is the publishing of his book “Common Stocks and Common Sense” in 2016.
Wachenheim’s book, published by Wiley in April 2016, details his investment strategies and provides insight into his career as a successful value investor. In “Common Stocks and Common Sense”, he explains his approach to investing in undervalued companies that face a low probability of permanent loss, with a goal of achieving an annual return between 15% and 20%. He typically holds stocks for multiple years until they appreciate as expected and makes very few changes to his holdings in the shorter term. Even when his investment thesis proves incorrect, Wachenheim argues that his investments still tend to generate positive returns, given that the stock market has historically returned an average of 9% to 10% annually. His strong emphasis on downside risk and capital preservation is a hallmark of his investment philosophy. He also contributed a chapter to the 2017 book “Harriman’s New Book of Investing Rules”, and a second edition of his own book was released in 2022.
Greenhaven Associates was founded in 1987 as a branch of Central National-Gottesman, one of the largest global marketers and distributors of paper, packaging, wood, and metals. Wachenheim invests with a long-term time horizon of three to four years, disregarding short-term performance, analyst predictions, and hedge fund sentiment. This disciplined approach seems to work in Greenhaven Associates’ favor, as the hedge fund has achieved an impressive average annual return of approximately 19% between 1988 and 2017.
Beyond his career in finance, Wachenheim has been deeply involved in philanthropy and nonprofit leadership. He served on the Skidmore College board from 1993 to 2001, where three of his children studied, and later became vice chair and chair of the investment committee until 2003. He has also been a long-time supporter of Williams College, his own alma mater, where a new science center is named after him. Additionally, he is a life trustee of the New York Public Library, where the Trustees Room has been named in his honor. Wachenheim chaired the board of WNET, the PBS affiliate, from 2017 to 2022, having joined the board a year earlier.
His extensive philanthropic work includes serving on the boards of UJA-Federation of New York, the New York Foundation (1990–1999), and the Arthur Ross Foundation. He and his wife oversee the Sue & Edgar Wachenheim Foundation, a charitable organization with reported assets of $438 million in 2022. The foundation has directed significant contributions to cultural and educational institutions, including Williams College, Skidmore College, the Museum of Modern Art, WNET, and the New York Public Library.
According to its 13F filing for Q4 2024, Greenhaven Associates held stocks worth a total value of over $6.7 billion with stakes in 22 companies. Notably, the hedge fund’s recent portfolio modification has revealed that over 65% of its hedge fund is invested in just four stocks.
Our Methodology
The stocks discussed below were picked from Greenhaven Associates’ 13F filings for the fourth quarter of 2024. They have been compiled in the ascending order of Greenhaven Associates’ stake in them as of December 31, 2024. To provide readers with a more holistic analysis of each stock, we have included the hedge fund sentiment regarding each company using data from over 900 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds show interest in? The reason is simple: our research has shown that we can outperform the market by imitating the latest 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 as of Q3: 54
Greenhaven Associates’ Equity Stake: $697.32 Million
Founded in 1967 in Pennsylvania by brothers Robert and Bruce Toll and headquartered in Fort Washington, Pennsylvania, Toll Brothers, Inc. (NYSE:TOL) is a prominent American homebuilding company specializing in building residential and commercial properties across the United States. Operating in over 60 cities across 24 states, in 2024, Toll Brothers celebrated a decade of recognition on the Fortune World’s Most Admired Companies list. Additionally, Chairman and CEO Douglas C. Yearley, Jr. was honored as one of Barron’s Top 25 CEOs the same year. The company has also received the prestigious Builder of the Year award from Builder magazine and remains the only homebuilder to earn Professional Builder magazine’s Builder of the Year title twice.
Toll Brothers, Inc. (NYSE:TOL) is known for its high-end homes, with an average selling price of $844,400, varying by region. Additionally, the company has expanded beyond single-family homes to offer townhouses, condominiums, luxury apartments, and student housing. Moreover, Toll Brothers provides services in mortgage financing, insurance, home automation, security, and landscaping, making it a comprehensive player in the housing market. It also operates Toll Integrated Systems, which manages a manufacturing, assembly, and distribution center in Pennsylvania, further enhancing its efficiency in home construction and delivery. The company’s strategic approach to diversification and high-quality developments has solidified its reputation as a leading luxury homebuilder in the United States.
Greenhaven Associates owned roughly 5.54 million shares of the company as of Q4 2024, with a total value of over $697.32 million. During the fourth quarter of 2024, the fund decreased its stake in Toll Brothers, Inc. (NYSE:TOL) by 1%. However, by the end of the September quarter, 54 funds out of the 900 funds tracked by Insider Monkey held stakes in Toll Brothers worth over $1.73 billion, up from 46 funds by the end of Q2 which suggests an overall positive hedge fund sentiment about the stock.
The most recent earnings results of Toll Brothers, Inc. (NYSE:TOL) were reported on December 10th, 2024, for the fourth quarter of its fiscal year 2024 which ended in October. It beat the consensus estimate of $4.35 by $0.28, reporting earnings per share for the quarter to be $4.63 against $4.11 EPS for the same period in 2023. October marked the end of the fourth consecutive quarter of this fiscal year wherein the company beat analyst expectations for its EPS. The quarterly net income was reported as $475.41 million, up 6.71% compared to $445.5 million for the same quarter last year. Operating income was $635.02 million, up 9.52% from the same quarter of 2023.
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.”
Overall TOL ranks 4th on our list of Greenhaven Associates’ top stock picks. While we acknowledge the potential for TOL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.
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Disclosure: None. This article is originally published at Insider Monkey.