TAKING TOLL TO TASK
Toll Brothers (TOL) has outperformed many of its homebuilding kin in the sector’s half-hearted, only occasionally successful recovery effort. Buyers seemed to be attracted by the company’s differntiating business model, relatively strong balance sheet, and cash-flow generation. However, as Raymond James noted in downgrading Toll Friday, the valuation itself has become a problem, because the homebuilder hasn’t been able to avoid the continuing pitfalls in the industry. The firm warned that investors could see an expansion of impairment charges, and warned that Toll might have to make more-substantial concessions on price or incentives to maintain its sales pace. Shares have declined 5% Friday.
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RE.ality Check:
As I've mentioned before, Toll has applied a time lag strategy to their MP sales in Hoboken. They could care less if buyers can't resell their homes at breakeven or profitable levels.
What knowledge or thought process are MP buyers applying when deciding NOT to walk away from their deposits? Is it the fact that a portion of cash is harder to lose than their long term balance sheet and well being? Or do we still have enough hogs out there playing with the bulls and bears - that Toll can entice?
I think it's the latter and they are tying their decisions to history. They seem to have forgotten that history got a jump ramp through loose credit and qualification processes but do they realize that they are already on the other side of that lift now?
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