5 Best Home Builder Stocks To Buy Now

4. Toll Brothers, Inc. (NYSE:TOL)

Number of Hedge Fund Shareholders: 37

There was an 18% jump in hedge fund ownership of Toll Brothers, Inc. (NYSE:TOL) during Q4, with ownership then remaining flat in the first quarter of this year. Michael Zimmerman’s Prentice Capital Management and Jim Simons’ Renaissance Technologies were among the funds to add TOL to their 13F portfolios during Q4.

Luxury home maker Toll Brothers, Inc. (NYSE:TOL) had a strong fiscal Q2, with revenue hitting $2.51 billion and EPS surging to $2.85, both of which crushed estimates. The company cited strong demand in its fiscal Q2 and into its fiscal Q3, which allowed it to raise its delivery guidance for the year. Toll Brothers now projects to deliver 8,900 to 9,500 homes during its current fiscal year at an average price north of $975,000.

Baron Funds noted that Toll Brothers, Inc. (NYSE:TOL) is more insulated from higher mortgage rates than many of its peers in the fund’s Q4 2022 investor letter:

“Toll Brothers, Inc. (NYSE:TOL) is the leading luxury homebuilder in the U.S. with a capable management team as well as a large and valuable owned land portfolio. Toll Brothers is more insulated than its peers from elevated mortgage rates because 20% of the buyers of Toll homes pay 100% in cash.

At its year-end 2022 price of only $49.92/share, the company is valued at only 0.83 times our estimate of 2023 tangible book value of $60/share. Historically, Toll Brothers’ shares have been valued, on average, at 1.4 times book value and a peak multiple of approximately 2.0 times tangible book value. If the shares recover in the next few years and trade only to the company’s long-term average multiple of 1.4 times book value, Toll Brothers’ share price would increase 82% to $91 per share.”