TOL's metrics are beyond the pale of any other home builder. It does not compute, add up, or make sense. It is stupid. Just plain stupid. It is being priced for perfection in a world where rates go to zero and everyone buys a $600k home, no income verified. Good news is good news, bad news is good news. Lower employement numbers are out and the bond market is getting squeezed, so you figure the builders go up on rates being lower, right? Fewer people to buy homes does not matter... Well the banks are flat to down, and the reits (see NEW) are getting creamed. Who do you think is next? Do you believe that backlog is solid and that there will be no cancellations going forward if things get ugly? TOL is behaving like Icarus, and as such, it will correct. The bigger and faster the rise, the bigger and faster the fall.
It is the classic sign of speculation and a bubble, IMO. The stock may well go much higher, but for the very reason it has gone up so fast, it will come down just as fast. And I am buying time, not betting on something happening next week (like good earnings). At this point, will even good earnings be enough to keep it here after rising 100% since last earnings? Today's volume is large, indicating to me there might be a lot of short covering going on.
No rational manager is buying the most expensive builder at these prices and metrics. Momentum traders don't care, but just as well because they will jump on the bandwagon on the way down. This stock will deliver good results -- as expected, but when the dust settles, folks will see that it is rich, perhaps by quite a bit and react just as well.
Until then the momo guys looking at the same trend line, who do not see the fast approaching train ahead, keep buying. The party is coming to an end. I don't know when, but at these levels, a long dated put is worth the risk, IMO.
In any event, I am not any more a gambler than anyone else justifying himself with the respective reasons to behave one way or another relative to a stock. And yes, I bought my puts after the majority of today's rise, so I don't feel today's pinch. Ten year yields bottomed out around 12:30 and they are climbing.
Best regards, |
