The re-election of Donald Trump and Republican control of Congress was initially hailed as a significant victory for the stock market and most stocks.

We don’t disagree with that assessment!

In the weeks since the election, we have seen many dislocations in individual sector groups.

Some of these are directly related to likely actions from the new government, but some are affected by potential impacts on the overall economy.

Today’s HX Trader idea is a leading company from one of those sectors.

It's a company with a tremendous track record in a group with an excellent long-term outlook.

The stock is oversold as it has ever been, and we think it can house some profits for our readers.

Here is the idea…

The company is leading homebuilder Toll Brothers, Inc. (NYSE: TOL).

The company was founded by two Pennsylvania brothers in 1967 – Robert and Bruce Toll – who were only 27 and 26 years old.

They saw an enormous potential future in the homebuilding industry. In particular, they wanted to focus on developing luxury homes and master-planned communities in the nicest areas of the country.

They were right!

Here is a table showing the company's earnings per share or "EPS" over the last decade…

They have been on a strong growth path over this period, and EPS took off in the post-COVID period. Even though analysts predict the company will see EPS down slightly in 2025, the company has an excellent track record.

This strong record in earnings is also evident in their ability to beat analysts’ earnings expectations.

These are the estimates that analysts put together to predict what a company is going to earn during a quarter. Companies that beat these numbers usually see their stocks going higher.

Here is how TOL has performed relative to analysts’ expectations over the last five years…

They have beaten expectations in every single quarter going back to the COVID period. This made a ton of sense when housing growth was booming post-COVID, but they have continued to post strong numbers.

Beating numbers for five years in a row will lead analysts to raise their estimates. When analysts raise their estimates, the stock prices almost always follow.

Here is a chart showing the stock price (black), the analyst's estimates for 2025 EPS (green), and how they have moved over the last couple of years…

The numbers and the stock have consistently increased over the period. The stock has more than tripled since the stock market bottomed in 2022.

Here is the longer-term performance of the stock price over the last five years…

Admittedly, it was off of a COVID sell-off bottom, but the stock has increased more than tenfold since then!

On the chart, though, you can clearly see a sell-off in the shares in recent weeks. It has been sharp and steep. This is after hitting a new all-time high at the end of November.

Here is a shorter-term chart and our key technical indicator chart – the relative strength index or "RSI"…

The stock price has been pounded and driven the RSI down to one of the lowest levels it has seen in decades.

What is happening?

The first concern has been the move higher in 30-year mortgage rates. Despite the Federal Reserve cutting short-term interest rates by -75 basis points (0.75%), mortgage rates have risen since September.

This has surprised the market, but mortgage rates are still in the range where they have been for the last two and a half years. Here is that chart…

This shouldn't have much impact on the outlook for the company and doesn't seem to have had much through the end of November.

It appears the more significant concern is about the potential immigration policy of Trump. He has promised to enforce a large-scale deportation program of illegal immigrants.

TOL – as a publicly traded company – does not employ undocumented workers but a mass deportation could impact the overall availability of labor to build homes. This would drive up costs and hurt profits.

Will this happen?

We don’t know and think the eventual deportation program may be much smaller than the market expects.

However, TOL is not likely to be significantly impacted. They pay some of the highest wages in the market and employ the most skilled workers. A decline in available labor at the bottom of the market will not impact them very much.

As we mentioned before, the stock has seldom been THIS oversold.

Here is a chart showing how the stock has performed the few times it has gone below the recent low (23) level of RSI…

This has happened only THREE times in the last decade. In the short term, the stock decreased a bit more, but it rallied afterward. Rallied a LOT!

We think the current situation will likely work out the same way, and we should be moving into this trade.