Is Toll Brothers Inc (TOL) Going to Burn These Hedge Funds?

Is Toll Brothers Inc (NYSE:TOL) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Toll Brothers Inc (NYSE:TOL) a buy right now? Money managers were turning less bullish. The number of bullish hedge fund positions shrunk by 1 in recent months. Toll Brothers Inc (NYSE:TOL) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 39. Our calculations also showed that TOL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the recent hedge fund action encompassing Toll Brothers Inc (NYSE:TOL).


Ken Griffin of Citadel Investment Group

Do Hedge Funds Think TOL Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards TOL over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Toll Brothers Inc (NYSE:TOL) was held by Greenhaven Associates, which reported holding $287.7 million worth of stock at the end of September. It was followed by Southpoint Capital Advisors with a $82.9 million position. Other investors bullish on the company included Iridian Asset Management, Eminence Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Toll Brothers Inc (NYSE:TOL), around 9.59% of its 13F portfolio. Iridian Asset Management is also relatively very bullish on the stock, earmarking 2.48 percent of its 13F equity portfolio to TOL.

Because Toll Brothers Inc (NYSE:TOL) has witnessed a decline in interest from the smart money, it’s easy to see that there was a specific group of funds who sold off their full holdings in the third quarter. It’s worth mentioning that Peter Muller’s PDT Partners dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $4.2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund said goodbye to about $3.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Toll Brothers Inc (NYSE:TOL). We will take a look at First Industrial Realty Trust, Inc. (NYSE:FR), Euronet Worldwide, Inc. (NASDAQ:EEFT), ADT Inc. (NYSE:ADT), Marriott Vacations Worldwide Corporation (NYSE:VAC), Axalta Coating Systems Ltd (NYSE:AXTA), Celsius Holdings, Inc. (NASDAQ:CELH), and Kornit Digital Ltd. (NASDAQ:KRNT). This group of stocks’ market caps match TOL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FR 25 252097 3
EEFT 38 379793 -2
ADT 18 335536 -3
VAC 23 751056 -12
AXTA 37 1048946 -10
CELH 22 220511 2
KRNT 22 287826 1
Average 26.4 467966 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $468 million. That figure was $706 million in TOL’s case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand ADT Inc. (NYSE:ADT) is the least popular one with only 18 bullish hedge fund positions. Toll Brothers Inc (NYSE:TOL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TOL is 60.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on TOL as the stock returned 15.1% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.