Home builder Toll Brothers Inc (NYSE:TOL)’s stock is around 5% in the green after reporting solid solid fiscal second quarter earnings. For the three months of 2016 ended in April 30, Toll Brothers earned $0.51 per share, versus $0.37 per share in the same quarter of fiscal 2015. Revenue was $1.12 billion, up 31% year-over-year, and home building deliveries were 1,304 units, a 9% increase from that of the prior year. The average price of homes delivered was $855,500, considerably higher than the $713,500 in fiscal year 2015 second quarter. Toll Brothers’ backlog increased 20% year-over-year to $4.19 billion on a dollar basis and rose 13% to 4,940 on a unit basis. Adjusted gross margin inched higher by 40 basis points to 25.7%. The company bought back 2.9 million shares of its common stock, and on May 23, Toll Brothers Inc (NYSE:TOL)’s board of directors authorized the repurchase of 20 million more shares while terminating its previous share repurchase program. Guidance is strong with the company projecting full year home deliveries of 5800-6300 homes, revenue of $4.76 to $5.36 billion, and full year adjusted gross margin of 25.8% to 26.2%.
Follow Toll Brothers Inc. (NYSE:TOL)
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Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Toll Brothers Inc (NYSE:TOL).
Toll Brothers Inc (NYSE:TOL) was in 34 hedge funds’ portfolios at the end of March. TOL shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 30 hedge funds in our database with TOL positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Reliance Steel & Aluminum (NYSE:RS), Spirit Realty Capital Inc (NYSE:SRC), and Brown & Brown, Inc. (NYSE:BRO) to gather more data points.
Of the funds tracked by Insider Monkey, Capital Growth Management, managed by Ken Heebner, holds the biggest position in Toll Brothers Inc (NYSE:TOL). Capital Growth Management has a $158.8 million position in the stock, comprising 6.8% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $64.4 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of Ray Dalio’s Bridgewater Associates and Jim Simons’s Renaissance Technologies.
On the next page, we are going to take a look at some funds that initiated stakes in Toll Brothers during the first quarter and compare the activity in other, similarly-valued companies.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Greenhaven Associates, managed by Edgar Wachenheim, initiated the largest position in Toll Brothers Inc (NYSE:TOL). Greenhaven Associates had $49.1 million invested in the company at the end of the quarter. Robert Hockett’s Covalent Capital Partners also initiated a $9.1 million position during the quarter. The other funds with brand new TOL positions are Charles Davidson’s Wexford Capital, D. E. Shaw’s D E Shaw, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Toll Brothers Inc (NYSE:TOL) but similarly valued. We will take a look at Reliance Steel & Aluminum (NYSE:RS), Spirit Realty Capital Inc (NYSE:SRC), Brown & Brown, Inc. (NYSE:BRO), and Zions Bancorporation (NASDAQ:ZION). All of these stocks’ market caps match TOL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RS | 26 | 442238 | 10 |
| SRC | 18 | 311268 | -6 |
| BRO | 14 | 518350 | -3 |
| ZION | 33 | 391497 | -3 |
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $416 million. That figure was $447 million in TOL’s case. Zions Bancorporation (NASDAQ:ZION) is the most popular stock in this table. On the other hand Brown & Brown, Inc. (NYSE:BRO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Toll Brothers Inc (NYSE:TOL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
