Baron Funds, an investment management company, released its “Baron Real Estate Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q1 2025, stocks were sold due to economic growth slowdown, inflation, and policymaking issues, including Baron Real Estate Fund®, without considering value. The fund declined 6.69% (Institutional Shares) in the quarter compared to a 3.11% decline for the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index) and a 0.76% gain for the MSCI US REIT Index (the REIT Index). In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Baron Real Estate Fund highlighted stocks such as Toll Brothers, Inc. (NYSE:TOL). Toll Brothers, Inc. (NYSE:TOL) is a US-based home builder that designs, builds, markets, sells, and arranges financing for a range of detached and attached homes. The one-month return of Toll Brothers, Inc. (NYSE:TOL) was 11.87%, and its shares lost 19.87% of their value over the last 52 weeks. On May 14, 2025, Toll Brothers, Inc. (NYSE:TOL) stock closed at $105.07 per share with a market capitalization of $10.448 billion.
Baron Real Estate Fund stated the following regarding Toll Brothers, Inc. (NYSE:TOL) in its Q1 2025 investor letter:
“Toll Brothers, Inc. (NYSE:TOL) is a leading luxury homebuilder in the U.S. with an exceptional management team and a large, valuable owned land real estate portfolio. Toll Brothers is more insulated than its peers from elevated mortgage rates because approximately 25% of Toll Brothers home buyers pay 100% in cash.
The company is valued at only 1.1 times 2025 estimated tangible book value and a P/E multiple of less than 7 times earnings per share. In the past, Toll Brothers’ shares have appreciated to a peak multiple of 2.0 times tangible book value which would represent over 50% upside. We believe a multiple of 1.8 to 2.0 times tangible book value will ultimately be warranted based on the company’s aspirations to generate a consistent return on equity in a range of high teens up to 20% or more.”
A team of architects meeting around a blueprint to discuss the design of a high-end apartment rental.
Toll Brothers, Inc. (NYSE:TOL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 64 hedge fund portfolios held Toll Brothers, Inc. (NYSE:TOL) at the end of the fourth quarter which was 54 in the previous quarter. While we acknowledge the potential of Toll Brothers, Inc. (NYSE: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 as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered Toll Brothers, Inc. (NYSE:TOL) and shared the list of best golf stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
