TOL opened this morning at $22.42. So far today the stock has hit a low of $22.33 and a high of $23.43. As of 12:15, TOL is trading at $23.43, up $1.10 (4.5%). The chart for TOL looks bullish and S&P gives TOL a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $17.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just seven weeks as long as TOL is above $17.50 at October expiration. Toll would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
I've been told that companies that are poised for long-term success operate based on a respect for the intelligence of their customers. In an interview on CNBC, Robert Toll, the CEO of leading homebuilder Toll Brothers (NYSE: TOL) demonstrated his lack of respect for consumers: "When we hold specials, which are not really specials, but just some reconfigured incentives to make it look as though something special is being given away . . ."
That's right, the CEO of a leading homebuilder went on CNBC and announced that the company's heavily-marketed sales promotions are essentially total bull crap -- just "reconfigured incentives designed to make it look as though something special is being given away . . ." Why would he say that? With that one statement, Mr. Toll has told anyone who might have dealings with his company -- either as home buyers or as investors -- that the company's tactics aren't exactly straightforward and honest.
So, if you're intrigued by an ad for a good deal on Toll Brothers homes, remember: it's just reconfigured incentives designed to make it look as though something special is being given away. The pounding that the market has given the stock over the past few years may be something similar.
Are you waiting for the malaise in the housing market to finally lift? Of course you are, who isn't? I can't wait for the day when headline news suddenly turns unambiguously positive. And I can't wait for the day when the market as a whole decides to anticipate it. For now, though, we've still got sour data to contend with. According to this article, famous luxury home-builder Toll Brothers (NYSE: TOL), whose competitors include Centex (NYSE: CTX) and Lennar (NYSE: LEN), reported preliminary results for the third quarter on Wednesday that showed a big decrease in home-building revenues. They decreased 34%, coming in at roughly $796 million. Seems par for the course, all things considered.
But there are more declines. Backlog orders decreased over 50%, and net signed contracts took a dive of 35% (both of these metrics are in dollar terms). The company is also issuing write-downs that will fall somewhere between $100 million and $200 million. Depressing stats, but according to the company press release, CEO Robert I. Toll believes that there is pent-up demand lurking out there in the marketplace for homes and he used the fact that total cancellations were down during the quarter as a tool for positive spin. Plus, the home-building revenue number did, in fact, beat estimates, according to Reuters. Does this make me want to run out and buy the stock?
No. Even though the stock has been strong in the last month, and even though it was up nearly 1% at the end of the trading session on Wednesday (a pretty nice showing on an otherwise overall downer of a day), I don't think I'm ready to initiate a position in Toll Brothers. I'd have to see a significant pullback in this one before my interest becomes piqued (some better economic news wouldn't hurt, either).
Disclosure: I don't own any company mentioned; positions can change at any time.
As if pouring salt on a wound, Moody's came out today and cut the rating of luxury home builder Toll Brothers (NYSE: TOL) to junk status. Their rating was cut to Ba1 from Baa3.
As reported in a Bloomberg report, Moody's said: " While the company is one of the only remaining home builders that is currently generating earnings before impairment charges, Moody's does not expect this to continue, as falling prices and lower absorption rates continue to impact margins."
Toll Brothers CEO Robert Toll has recently told the market that he thinks that real estate is still in a downward spiral. It seems that Moody's agrees. While this all maybe true, for long term investors, shares in Toll Brothers are certainly intriguing under $19. Long term, contrarian inclined investors may want to do a bit of research as the shares maybe approaching levels that are hard to refuse.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/3/08.
Toll Brothers (NYSE: TOL) shares are trading higher after the company reported a second-quarter loss of $93.7 million, or 59 cents per share, handily beating analysts' warnings of a loss of 89 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TOL.
After hitting a one-year high of $29.15 last June, the stock hit a one-year low of $15.49 in January. TOL opened this morning at $21.39. So far today the stock has hit a low of $21.10 and a high of $21.98. As of 12:30, TOL is trading at $21.77, up $0.81 (3.9%). The chart for TOL looks bullish and deteriorating, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just three and a half months as long as TOL is above $17.50 at September expiration. Toll Brothers would have to fall by more than 31% before we would start to lose money. Learn more about this type of trade here.
TheStreet.com's Jim Cramer says the mortgage problem is in the process of cresting, which is why the stocks have largely bottomed.
We are in the heart of default country, and we knew we would be. This is the toughest moment. You need to go back and look at the calendar to realize the astonishing acceleration in defaults. It's simple: This moment two years ago is when the underwriting standards were the lowest, and this is the moment when the defaults will be the highest because the loans are resetting at high levels and most of the lenders, lenders like Countrywide (NYSE: CFC) (Cramer's Take), are more interested in getting as much out of a borrower as possible before kicking him out than working out the loan.
Think about it.
In the second quarter of 2006, the housing industry was going strong. We were in the 7-million-homes-changing-hands mode, and the vast majority of those homes required little money down, with home equity loans being taken out immediately to pay whatever little interest was being charged. These were the moments of the ultimate no-doc-high-fee loans by New Century Financial, Ameriquest, Resmed (Ditech), American Home Mortgage, Novastar, and of course, Countrywide. This was when the homebuilders' mortgage arms lent the most terribly.
Despite the fact that the challenging housing conditions are still persisting, it looks like that some major housing companies are poised to see the light at the end of tunnel. SmartMoney underlines the fact that there has been some encouraging trend for homebuilders during the past few months.
The National Association points out that, "the housing market has shown no evidence of improvement thus far," and the sentiment index is close to a historical low.
Looking at investing in housing stocks, one analyst at T. Rowe Price, Josh Spencer, makes a two-way analysis. From his point of view, housing stocks have a lot of risk if we are talking about their volatility, but they are not as risky when referring to a long-term time horizon due to their current cheap value.
Toll Brothers (NYSE: TOL) shares are falling today after the company announced Q2 preliminary earnings this morning down 30% from a year ago and that it expects more "challenging times" ahead. However, the stock might be getting some support from another part of the statement that indicated TOL is looking to use some of its available capital to make acquisitions at cheap prices. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on TOL.
After hitting a one-year high of $31.15 almost a year ago, the stock fell much of 2007 to hit a one-year low of $15.49 in January. This morning, TOL opened at $23.25. So far today the stock has hit a low of $22.66 and a high of $23.67. As of 12:45, TOL is trading at $23.00, down $0.37 (-1.6%). The chart for TOL looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in six weeks as long as TOL is below $27.50 at June expiration. Toll would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.
Shares of luxury homebuilder Toll Brothers Inc. (NYSE: TOL) are higher in early trading despite posting a decline in its quarterly profit. It looks like the company is still looking for the light at the end of the tunnel as lower sales and increased write-downs resulted in weak earnings results.
During the first quarter, Toll Brothers said it swung to a loss of $96 million, or 61 cents per share as the weak U.S. housing market put a curb on demand and builders were forced to slash home prices. In addition, the company reported that the number of signed contracts for new homes dropped 46% to $573.1 million from the same period last year.
Included in the company's numbers were pre-tax write-downs of $245.5 million. Excluding that, the largest U.S. luxury home builder's earnings would have been $57.3 million, or 35 cents per share. Analysts, on average, forecast a quarterly loss of 44 cents a share.
MOST NOTEWORTHY: Suntech Power, Premier Exhibitions and the Homebuilders Sector were today's noteworthy initiations:
Citigroup named Suntech Power Holding (NYSE: STP) their top pick for China solar due to its leading scale and technology roadmap for higher cell efficiency, initiating shares with a Buy rating and $55 target.
Merriman believes Premier Exhibitions (NASDAQ: PRXI) can move to the $14.50-$17.00 through the continued monetization of the company's current tours, the launching of additional tours and the value of the Titanic artifacts on hand. The firm started shares with a Buy rating.
TheStreet.com's Jim Cramer says a guarantor's map of newly restricted markets is shocking in its scope.
How bad is it out there in housing? It's difficult to say, because we know that once you start recognizing the problem, they say that you are nearing a solution. But one of our terrific readers sent me this note over the weekend, which is a reality check to everything, acknowledging the cordoning off of whole areas around the country for mortgages.
Who can do such a thing? The buyers? The sellers? The realtors? No, the personal mortgage insurers who were there to protect the banks from deadbeats but are themselves under siege.
Last week they sent out this memo. When you overlay this list with the grades that Bob Toll gave the markets he is in last week on the Toll Brothers (NYSE: TOL) (Cramer's Take) call, you know that we aren't done lowering rates if we intend to beat this problem.
During the quarter, the company had a 22% drop in revenues from the same period last year. The company is getting hit from a couple of different angles including falling home prices. On top of that, the average number of canceled home orders has also been on the rise. Finally, the company reported that the number of signed contracts dropped 46% from the same period last year.
Across the nation, Toll is seeing weak conditions in most areas, and expects the current challenges to continue for some time. The company compared the current situation to that of the Titanic, "things don't turn on a dime". Interesting comparison for the company. When companies start to compare their industry to the fate of the Titanic, you really have to start to wonder just how bad things have gotten, or are about to get. It definitely doesn't paint a pretty picture if you ask me.
Shares of the stock are down about 1% this morning in the premarket. The company is due to report complete first quarter numbers on February 27.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"Homebuilders have been in a slump, to say the least," says Jim Farrish, editor of Sector Exchange.
"The technical charts on homebuilders look very similar to those of technology stocks during their rise from 1998-2000. In fact, the index has declined more than 70% peak to trough. Looking toward 2008 and the housing market, we could start to see a turnaround.
"The start is likely to be government aided, which is why we like this as an aggressive play, as the Federal government will put more money into fixing something than corporate America. Current proposals will not come close to fixing it, but will at least put a band aid on the situation and allow the healing process to begin.
"Our vote to benefit here would be Toll Brothers (NYSE: TOL). The company has one of the better-looking balance sheets in the industry and management has done a fairly good job of dealing with this downside market.
TheStreet.com's Jim Cramer says until the public feels they won't lose money on a home, no problems will get solved.
Would you ever buy a house in this environment? That's really the ultimate question that has to be asked -- that the Fed should be asking -- if this junk is ever going to come back to life.
I know some of it is so short-term that the jury's back and the verdict is guilty, but most of it hinges on a simple issue: housing depreciation. If you think that your house is going to lose value, default on the second home lien. Which then, we know now, means defaulting on the ultimate mortgage.
The Fed can tinker with LIBOR (I still can't believe they wasted the banking system's time with the LIBOR/auction plan). It can issue statements that are a little more pro-growth than neutral.
Or it can try to change the psychology of the home buyer and homeowner.
Toll Brothers (NYSE: TOL - option chain) shares are soaring higher today after weekly mortgage data came out this morning that showed applications rose last week. This after yesterday's mixed numbers for new home sales caused at least one celebrity stock analyst to call a bottom in housing. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TOL.
I've been told that companies that are poised for long-term success operate based on a respect for the intelligence of their customers. In an 
Despite the fact that the challenging housing conditions are still persisting, it looks like that some major housing companies are poised to see the light at the end of tunnel. SmartMoney 
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Should you sell into today's rally? Yes, if you think there are more surprises to come (I do)
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