Toll Brothers Inc. (tol) – “doug Yearley’s The Bomb, But Tariffs Could Be The Fly In The Ointment” – Jim Cramer

We recently published a list of What Did Jim Cramer Say About These 19 Stocks Recently? In this article, we are going to take a look at where Toll Brothers, Inc. (NYSE:TOL) stands against other stocks that Jim Cramer discussed recently.

Jim Cramer kicked off his latest episode of Mad Money by highlighting the wild swings in the market, the ongoing trade war with Canada, and the growing concerns about tariffs and inflation. Although tech stocks attempted a rally, it fizzled out by the close. Cramer described the volatile trading session by saying:

“We got a good sign. The beat-down tech stocks rallied and rallied hard at one point after a lot of time lost in the wilderness while the recession proof stocks, well, they finally got clubbed.”

Jim Cramer then explained that the reason behind this volatility is the escalating trade war with Canada. Here’s how he explained the situation:

“We got a trade war going with Canada. Here’s what happened, they announced a 25% tariff on electricity in our country earlier today. Immediately president Trump announced some hard retaliation doubling the tariffs on aluminum and steel. The steel side can be dealt with. Aluminum, I don’t know but it’s bad news. Canadians produce a huge percentage of that stuff for our airline makers, for trucks, for cars. A 50% tariff would be very inflationary and could destroy the profits of the automakers.”

Cramer then shifted his focus to the broader implications of the White House’s stance on the stock market. Here’s what he said:

“So, let’s talk about stock prices in the White House. Now this weekend, the President said he’s not focused on the stock market. Maybe if you’re in power and you’re not up for re-election, the stock market could be ignored. That’s just one problem. This is what the President’s forgetting: the stock market serves a dual role. Yes, it makes rich people richer, no doubt—at least when it’s going up. But when it goes down, it can also be a signal; a signal that things aren’t well in the economy, that business could be getting tougher, and that layoffs could be on the table.”

While Cramer agreed with the broader goal of addressing trade imbalances, he criticized the way the administration is handling it, which is causing widespread uncertainty. Here’s how he put it:

“Because of the President’s tumultuous approach to trade, these tariffs are beginning to scare people—regular people, you, me—and that’s what the stock market has been saying before the Canadians blinked and we momentarily avoid a real trade war. But we’re still seeing a pronounced decline in small business optimism. It’s a cliché. Small businesses are the backbone of the economy. Big businesses are always trying to trim costs, small businesses hire. We’re starting to see large shortfalls in many different industries.”

Finally, Cramer’s opinion is that the U.S. is no longer a manufacturing-driven economy, but a service-driven one, where businesses thrive on stability and consumer confidence. Here’s how he explained it:

“Now we’re not a manufacturing economy, we’re a service economy. That’s why it stings when you see these retailers, telecoms, and airlines linking the negativity of their customers to political actions. […] The issue is that, again, we’re service. Most of our business is service, and that economy is starting to roll over because consumer confidence is declining as people worry about the impact of these tariffs. They don’t understand them. Sure, we have plenty of room for layoffs, so to speak, because we have very low unemployment. But the stock market is saying the tariffs will be inflationary, and the White House hasn’t explained to the American people why it’s worth it.”

Our Methodology

For this article, we compiled a list of 19 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on March 11th. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Toll Brothers Inc. (NYSE:TOL)

Number of Hedge Fund Holders: 65

When asked about Toll Brothers Inc. (NYSE:TOL), Cramer expressed his admiration for the company and its CEO, but also presented some risks that the stock may face. Here’s what he said:

“Okay so listen to me and listen good. It’s Doug Yearley (Toll’s CEO) and you know Doug, he’s the bomb, and what I really care about here is they raise the dividend, and this is the big fly in the ointment. If president Trump goes after the lumber industry of Canada, then they have to raise the price of homes. You got to hope that the president does not go after lumber even though that’s an area where you could easily take down the Canadians that would make me want to sell Toll; otherwise, I want to buy it.

Baron Real Estate Fund stated the following regarding Toll Brothers, Inc. (NYSE:TOL) in its Q4 2024 investor letter:

“As noted earlier in this letter, we chose to decrease the Fund’s homebuilder exposure in D.R. Horton, Inc., Lennar Corporation, and Toll Brothers, Inc. (NYSE:TOL) in the most recent quarter following exceptional share price performance over the prior two years. From September 30, 2022, through September 30, 2024, shares of Toll Brothers, Lennar, and D.R. Horton increased 269%, 155%, and 184%, respectively. Homebuilder valuations for our investments had approached near peak valuations from prior cycles (at or above 2 times tangible book value). We also have concerns that the recent 100 basis point increase in interest rates will further crimp housing affordability. This could lead to flattening home prices and elevated homebuilder incentives to entice buyers to purchase a home. Further, the new administration policy decisions around tariffs, immigration, and deportation may increase the cost for labor and materials. The issues cited above may lead to pressure on homebuilder gross margins in 2025.

The shares of several homebuilders and residential-related building product/ services companies foreshadowed some of these concerns in the fourth quarter and valuations are becoming more compelling. We are monitoring developments closely and may look to acquire additional shares in 2025…” (Click here to read the full text)

Overall, TOL ranks 13th on our list of stocks that Jim Cramer discussed recently. While we acknowledge the potential of TOL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TOL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.