The lead story on the cover of yesterday’s Wall Street Journal discussed the slumping housing market and a CEO of a major homebuilder (Robert Toll of Toll Brothers (NYSE:TOL) as saying, “It would be difficult to characterize the position of the home builders as other than in a hard landing.” Some have made the argument that housing must be really bad since even the CEOs of homebuilding companies are so bearish.
Reading this interview brought to mind some other interviews with the above-quoted CEO about which we wrote in our April 2005 Reminiscences newsletter. In February 2005, this CEO appeared on CNBC and stated that the shorts in his company’s stocks “will get crushed.” Over the next week, he sold 1.25 mln shares in the company for net proceeds of $110 mln. Then over the next six months, he proceeded to sell another 1.7 mln shares, raising $134 mln. His total proceeds from selling his company’s stock following his "busted shorts" comments was over $244 mln.
This same CEO was also interviewed by USA Today in October 2005. As the excerpts below detail, even after all those sales, he was still quite bullish on the housing market at that time as well.
Now after all this do you still think his public comments on the housing market should be taken with anything more than a grain of salt? If his past record is any guide, we'd be on the lookout for some insider purchases in the company.
TOL 1-yr chart: