XHB

Toll Brothers Expects Demand to Remain Solid Into 2025

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Image: Toll Brothers stock has done quite well during the past couple years. By Brian Nelson, CFA Luxury homebuilder Toll Brothers (TOL) recently reported fiscal third quarter results with revenue and non-GAAP earnings per share coming in better than expectations. Home sales revenues advanced 2% from the same period a year ago, while pre-tax income came in at $503.6 million, down from $553 million in last year’s quarter. Fiscal third quarter earnings per diluted share was $3.60 compared with $3.73 in the same period a year ago, but it exceeded the consensus forecast of $3.31 per share. Net signed contract value was $2.41 billion in the quarter, up 11% from last year’s period, while contracted homes were also up 11% … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Lennar Navigating Fluctuating Interest Rate Environment Well

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Image: Lennar has been a strong performer since the beginning of 2023. By Brian Nelson, CFA On June 17, homebuilder Lennar (LEN) reported better than expected second quarter results for fiscal 2024. Total revenues increased 9%, while diluted earnings per share leapt to $3.45 in the quarter from $3.01 in the same period a year ago. New orders jumped 19%, to 21,293 homes, while the firm’s backlog stood at 17,873 homes with a dollar value of $8.2 billion. Deliveries in the quarter increased 15%, to 19,690 homes. Its average sales price, net of incentives, per home delivered came in at $426,000 in the second quarter, while its homebuilding gross margin was up 10 basis points from last year, to 22.6%. … Read more

Toll Brothers Notes Strong Start to Spring Selling Season

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By Brian Nelson, CFA Back on February 20, luxury homebuilder Toll Brothers (TOL) released first-quarter results for fiscal 2024. Both revenue and GAAP earnings per share came in better than expected. Home sales revenue increased 10% in the quarter from the year-ago period, while delivered homes advanced 6%. Impressively, net signed contract value was up 42% from last year’s quarter, while the number of contracted homes increased 40%. Its backlog fell 18%, to $7.08 billion, however, but the company continues to benefit from higher home sales gross margins. Management’s commentary on the quarter was upbeat in the press release: We are very pleased with our strong first quarter results. We delivered 1,927 homes at an average price of approximately $1.0 … Read more

SVB Financial, Silvergate Capital, Credit Suisse Reveal Cracks in Global Financial System

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Image: SVB Financial looks to be collateral damage of the Fed’s rate-hiking cycle, and we can’t rule out that other regional banks could have also managed interest-rate risk wrong. Shares of SVB Financial have collapsed, and other banks could be facing similar issues that have yet to come to light. Image Source: TradingView By Brian Nelson, CFA We don’t include any banks in the newsletter portfolios, but we include slight “exposure” to the Financial Select Sector SPDR (XLF) in the Best Ideas Newsletter portfolio, primarily for diversification reasons. We have never been fans of the banking business model, and here is what we wrote in the first edition of Value Trap: Theory of Universal Valuation: It’s likely we will have … Read more

Home Depot Says Customers Remain “Resilient and Engaged”

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  Image: Home Depot’s third-quarter performance wasn’t bad. Inventories expanded, but management reiterated that its core customer remains resilient and engaged. Image Source: Home Depot By Brian Nelson, CFA On November 15, home improvement retailer The Home Depot (HD) reported strong third-quarter results that beat expectations on both the top and bottom line. Revenue advanced 5.6% in the period thanks to comparable sales growth of 4.3% and 4.5% comp expansion in the U.S. Net earnings came in at $4.24 per diluted share, showcasing 8.2% growth over the $3.92 per-share mark from last year. The firm noted that its core customer is still healthy, indicating that it has yet to feel a meaningful impact from what could be a painful decline … Read more

Banks Held Up in 3Q 2022 But Mortgage Market Dynamics and Consumer Health Are Big Economic Concerns

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Image: Homebuyer mortgage payments on new homes have increased more than 50% since last year due to rising interest rates. We think this is a precursor to lower housing prices, which could have implications across the banking and financials sector. Image Source: Redfin By Brian Nelson, CFA We’ve never been huge fans of taking on outsized banking and financials exposure in the simulated newsletter portfolios for a number of reasons. First, the banking industry, much like the insurance industry, is generally muted exposure to the broader economic environment. Though having some exposure to banking and financials may make sense, long-term investors are going to get a better bang for their buck with general operating entities that aren’t necessarily tied to … Read more

ICYMI: Things Have Changed Fast; Inflation and the Fed Have Damaged the Economy

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This article was originally published October 5.   Image Source: EpicTop10.com By Brian Nelson, CFA The year 2022 started out with the popping of the bubble in the alternative investments arena–namely in the cryptocurrency (BITO), non-fungible token (NFT), and the collectibles markets–coupled with worries about the Fed raising interest rates to combat inflation and weakness in the most speculative equity areas, namely disruptive innovation stocks (ARKK). It’s important to note that the consumer price index (CPI) started to edge meaningfully higher in early 2021 (not this year). Though the writing was on the wall with respect to impending Fed tightening, as investors, we have to assess what the Fed will do and the impact on the markets, not necessarily what … Read more

Dividend Growth Idea Home Depot Beats Estimates, Maintains Guidance

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Image Shown: Dividend growth idea Home Depot Inc is a stellar free cash flow generator in almost any operating environment. Historically, the home improvement retailer’s free cash flows have fully covered its dividend obligations, and we forecast that will continue to be the case going forward. However, we caution that its sizable share repurchases are being funded in part by its balance sheet. The firm has a large net debt load on the books. Image Source: Home Depot Inc – Second Quarter of Fiscal 2022 IR Earnings Presentation By Callum Turcan On August 16, Home Depot Inc (HD) reported second-quarter earnings for fiscal 2022 (period ended July 31, 2022) that beat both consensus top- and bottom-line estimates. The home improvement … Read more

Dividend Growth Idea Home Depot Beats Estimates and Boosts Guidance

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Image Shown: Dividend growth idea Home Depot Inc is a tremendous generator of shareholder value due to its stellar return on invested capital performance. Image Source: Home Depot Inc – First Quarter of Fiscal 2022 Non-GAAP Reconciliation Financial Package By Callum Turcan On May 17, Home Depot Inc (HD) reported first quarter earnings for fiscal 2022 (period ended May 1, 2022) that beat both consensus top- and bottom-line estimates. Demand from professionals remains robust, offsetting waning demand from do-it-yourself (‘DIY’) customers. In the wake of its strong fiscal first quarter performance, Home Depot boosted its fiscal 2022 guidance in conjunction with its latest earnings report. We are big fans of Home Depot’s income growth potential and include shares of HD … Read more