3 Homebuilders to Evict From Your Portfolio

A stronger home market may be coming, but these shares have gotten ahead of any rebound

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3 Homebuilders to Evict From Your Portfolio

Toll Brothers

Supposedly, luxury markets are performing better than the rest of the economy. While the majority of us struggle, the rich and ultra-rich keep spending. And the clear leader in mass luxury homebuilding is Toll Brothers (NYSE:TOL).

But cracks in the luxury world may be showing. A number of stocks in this category have lately slipped, including Harley Davidson (NYSE:HOG) and Ralph Lauren (NYSE:RL), to name a couple.

Over the last year, Toll Brothers shares have actually drifted lower. But since the end of September, when the stock bottomed at just above $13, it has gained more than 40%. That’s a rip-roaring return that envisions a robust housing rebound, which recent statistics suggest may still be elusive.

The stock is ahead of itself. Shares trade for 1.2 times book value — not horribly expensive, but not cheap either. Wall Street expects Toll Brothers to make 20 cents per share in the fiscal year ending Oct. 31. For the following year, profits are seen  improving to 31 cents per share.

After a significant beat in the last quarter ending July 31, look for Toll Brothers to come back to earth when it reports results for the quarter ending Oct. 31. Based on the big gains over the last month, I would sell Toll in advance of results and look to buy shares at a cheaper price later.

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Article printed from InvestorPlace Media, http://investorplace.com/2011/11/3-homebuilders-to-evict-from-your-portfolio/.

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