Toll Brothers Inc. (TOL)

Report the other day was fairly constructive.

They report Tuesday. It's been a decent, but not blow-out time, for Toll. It's tough to own a homebuilder when interest rates are rising. 

With falling interest rates, you buy the homebuilders. TOL reported good numbers, but a weak forecast.

There continues to be problems in the U.S. with home builders, a business which is very sensitive to higher interest rates. Rates are coming down especially since there will be a new Fed Chair next May who will lower rates. With immigration down there is less labour available. Costs are higher along with tariffs on lumber. He thinks the problems are transitory and the situation will improve.

They report Tuesday. He expects a good quarter, but also restrained guidance because of a pervasive negative mood in the economy. Trades at only 7x PE.

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.

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.

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.

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.