This is a partial transcript from Your World with Neil Cavuto, December 17, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.
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NEIL CAVUTO, HOST: Plenty of homes are being built in the real world. Go to any cocktail party, talk to almost any investment pro, and you hear a lot about a housing bubble. That's just like once hot tech stocks, housing is going to get hit and hit hard. They've been talking like that for years now. The trouble is the housing industry is not going along. Housing is as hot as it's ever been. Starts up nearly 2.5 percent last month. Although housing permits -- a sign of future construction -- did drop 2.7 percent.
What does arguably one of the most successful builders in the U.S. think of that? Well, let's ask him, Toll Brothers CEO Robert Toll. He joins us from Philadelphia.
Robert, good to see you.
ROBERT TOLL, CHMN. & CEO, TOLL BROTHERS (TOL): Nice to see you, Neil.
CAVUTO: Happy holidays to you.
TOLL: Same to you, thank you.
CAVUTO: Still happy holidays for your business, what's the deal here?
TOLL: It is. The bottom line on the deal is that the supply is so constrained that the public home building companies are enjoying the best of all worlds. Demand remains fairly constant, goes up and down a bit, but, is being even spurred to a greater extent than normal because of the lack of investment alternatives. And, at the same time, you've got tremendous political movement in the nation to contain the growth of building lots. So, within increasing supply, and a constant increasing demand, a constant supply, you get happy times for the home building companies.
CAVUTO: Yeah. But not happy times at least of late for your stock, you are well off highs, after great run-up. Your multiple is still lower, substantially lower than the market average, and yet quarter after quarter, including this one most recently completed, record numbers. What's the disconnect?
TOLL: Nobody ever said there is a connect between fortunes of company and the fortunes of the company stock. The stock always depends on the buyers and the sellers, doesn't depend on fortunes of company. In the long run, it should. And we would hope that we have had enough of a long run that we could point to the short run and say that things are going to get a lot better. We've had, for instance, for past three years, 29 percent compounded annual growth in earnings, for the past 10 years, we have had the same, a 29 percent annual growth.
CAVUTO: I'm sorry, Bob. But aren't a lot of these guys saying, who are cynical about your stock, that, look, a lot of your buyers are the ones who are battered in the stock market. They don't have wherewithal to buy these expensive homes. You're in markets that are very - particularly in the New England and the northeast area, very hot. Some say excessively bubbly, and that that is what's hurting you.
TOLL: We don't see the bubble, in order to see a bubble, you've got to have speculation, you've got to have investment taking the place of real home ownership. And that is not existent this time. What you've got, is just a pretty constant demand, grows because of the population in general. And it keeps bumping up against this very limited supply. That's why you see the price increases but you haven't seen anything yet. The price increases in this country are nothing compared to what the price increases have been in Britain for instance, or in other countries where the no growth movement has even greater strength than it has here.
CAVUTO: All right. Robert Toll, good seeing again. The chief executive of Toll Brothers, Bob Toll from Philadelphia.
TOLL: Thank you, Neil.
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