Pat Naccarato Toll Brothers Inc. TOL-N BUY Sep 10, 2008

It can go much higher, but the homebuilders have run up a lot lately ahead of Powell's Jackson Hole speech last Friday when he announced rate cuts coming. Let this come down before buying.

Is up 45% this year already. Anything related to housing (and falling interest rates) is doing well. He expects a housing boom. 

Owns many homebuilders over the years and done very well. TOL is the highest-quality builder in the US, attracting the highest demographic. Rich. 25% of their buyers pay with cash. TOL now offers homes to a poorer demographic. They trade at a reasonable PE and interest rates are coming down. Also, the US is 5 million home short.

Likes it. In mid-cap space. 200-day MA is trending higher, price is trending higher. Clear channel of higher highs and higher lows, so it looks good technically. Interest rates coming down could be beneficial. Growth rate ~9%, at 10.6x forward PE.

He doesn't own it because he owns only 35 names, can't own everything. But see his Top Picks ;)

The chart shows higher highs and higher lows. The Chaikin Moneyflow since July is positive with each of the 4 pullbacks seeing strong buying. LAnf targets $220 in 2025.

Trading very constructively. Owns a number of them in the space. Has owned them for close to 15 years. Have done extremely well. TOL is the top of the heap. Average sale price of $1M. 25% are cash buyers so they attract the affluent. About 4-5M homes are missing in the US. It's natural organic growth. Lower interest rates are coming down the road. Lower tax regime is also coming. Both good things.

They report Monday. Is up 50% this year. Shares jumped, but stalled when bond yields surprisingly went higher. Now, bond yields came down, so shares rose again.

Last week, they reported a fine quarter, but not their guidance. Their backlog is slipping 7% year over year, though better than expected. They guided the current quarter that fell short for Wall Street. The CEO noted that the housing market was soft in September and October, but climbed in November after the election gave homebuyers clarity. Also, the wealth transfer from parents to Millennial homeowners is underway. TOL is up 30% this year. Bottom line: TOL appears to be working harder than the street expected to maintain numbers in a tepid housing environment. Shares are down 15% in the past week.

He bought this and other homebuilders in 2009 during the crisis and still owns them. They remain great performers. The US remains 5 million housing units short, unable to keep up with immigration. However, labour is about to get very tough, if Trump follows through with expelling undocumented workers, many of who work in this sector.

Homebuilder space hit very hard over last 30 days. He sees it as an opportunity. Stocks go up and down, focus on the fundamentals. Long term, the chart's been good. One of his favourites. Wholeheartedly recommends.