Wedgewood Partners , an investment management company, released its third-quarter 2026 investor letter. The letter can be downloaded here . Wedgewood Composite delivered a net return of 2.5% in the quarter, compared to 2.3% for the Standard & Poor's 500 Index, 0.9% for the Russell 1000 Growth Index, and 2.6% for the Russell 1000 Value Index. Surging Treasury yields and macro headwinds have heavily pressured rate-sensitive stocks and market breadth, driving equal-weighted S&P 500 underperformance. However, AI resilience and mega-cap tech pushed the NASDAQ 100 to record highs. While rising inflation, energy price spikes, and higher interest rates continue to pressure broader equities, the firm is actively deploying capital into compelling new positions, recently adding Toll Brothers, Hermès, and TJX Companies. Also, check the strategy's top five holdings to see its best picks in 2026.
In its Q3 2026 investor letter, Wedgewood Partners highlighted that Toll Brothers, Inc. (NYSE:TOL) weighed on the portfolio's returns during the quarter. Toll Brothers, Inc. (NYSE: TOL ) is a luxury home builder headquartered in Fort Washington, Pennsylvania. On October 16, 2026, Toll Brothers, Inc. (NYSE:TOL) closed at $133.70, with a $12.32 billion market capitalization. Toll Brothers, Inc. (NYSE:TOL) posted a 2.20% YTD pullback, trading within a 52-week range of $123.15 to $168.36.
Wedgewood Partners stated the following regarding Toll Brothers, Inc. (NYSE:TOL) in its Q3 2026 investor letter:
"Toll Brothers, Inc.(NYSE:TOL) detracted from portfolio performance in the quarter. Cyclical headwinds over the past few years have driven earnings lower. However, Toll is one of the few homebuilders still growing net orders while maintaining healthy margins and low cancellation rates. It also has a land pipeline that can sustain double-digit growth as demand stabilizes. Toll Brothers' core customers are affluent buyers, a quarter of whom pay cash and often build to order. As a result, the Company's buyers are generally less sensitive to interest rates than much of the entry-level housing market, which continues to face affordability pressures. Despite the continued back-up in mortgage rates, we continue to hold, as we think U.S. housing has substantial pent-up demand and chronic undersupply."
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Toll Brothers, Inc. (NYSE:TOL) is not on our list of the 40 Most Popular Stocks Among Hedge Funds . As per our database, 49 hedge fund portfolios held Toll Brothers, Inc. (NYSE:TOL) at the end of the second quarter, which was 59 in the previous quarter. While we acknowledge the risk and potential of Toll Brothers, Inc. (NYSE:TOL) as an investment, our conviction lies in the belief that some 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 Toll Brothers, Inc. (NYSE:TOL) and that has 10,000% upside potential, check out our report about this cheapest AI stock .
In another article , we covered Toll Brothers, Inc. (NYSE:TOL) and noted that despite fiscal Q3 net income falling to $280.1M ($2.97/share), the company saw net signed contracts rise to $2.52B on resilient luxury housing demand. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.
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This article is originally published at Insider Monkey .
