Fund Times: Housing Slowdown Impacts Fund Results
Plus, news on Fairholme's energy stake, Columbia fee cuts, and more.
Many fund managers that have participated in the housing boom of recent years by purchasing the stocks of homebuilders are this year feeling the pain of a slowing housing market as these stocks decline. Luxury homebuilder Toll Brothers (TOL), for instance, just announced a disappointing third-quarter (ending July 31) decline in revenue of 0.5%, when many analysts had forecast a 7% increase for the period. The firm's stock traded down nearly 5% Wednesday after the announcement was made, and is down 28% for the year through Aug. 9. Funds like Muhlenkamp Fund (MUHLX), run by Ron Muhlenkamp, a manager we have a great deal of respect for, have suffered this year, due to positions in homebuilders. Muhlenkamp Fund, for example, is down 6.8% on the year, placing it at the very bottom of the large-value category.
Muhlenkamp, however, got into Toll early on, which aided his fund's returns over the past several years. Despite the recent stock price volatility, he's sticking with his pick, along with others in the sector. He thinks the macroeconomic and fundamental stories behind the stocks are still sound. Alpine U.S. Real Estate Equity Fund (EUEYX), like many funds in the real estate category, also has been hurt by the decline in homebuilder stocks.
Lawrence Jones does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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