There Are Few Things As Reliable As Zillow Outperforming During The 1st Half of Any Year
Zillow is a company that has some very defined seasonal characteristics. It makes sense. Real estate is a highly cyclical industry not just from a broad macro perspective, but within any calendar year. Spring and summer are traditionally the busiest month for new residential real estate purchases. Zillow tracks these buying patterns almost perfectly. The stock tracks not just the seasonal characteristics of real estate with uncanny consistency, but it also moves inverse to interest rates. The cost of borrowing to buy real estate as expressed through the ten year yield is just as important a consideration of when and where to buy the stock as the seasonal aspect. On average, Zillow returns 50% during the first half of the year with remarkable consistency. The only time it has been down during the first half of the year was during 2015, a year when rates rose 7.6% from the beginning of the year through the end of Q2. Here is a look at first half performance in each year since the stock went public with the ten year yield plotted (blue) to further demonstrate its negative correlation to rates. Zillow 1st Half 2012 Return +71% Zillow 1st Half 2013 Return +103% Zillow 1st Half 2014 Return +75% Zillow 1st Half 2015 Return -18.08% Zillow 1st Half 2016 Return +41% Zillow 1st Half 2017 Return +33% Zillow 1st Half 2018 Return +47% Zillow 1st Half 2019 Return +19% as of 3-15-2019 Further, the last time Zillow traded at a multiple of 6x revenues was 2016, a year that saw the stock return 41% during the first half of the year. A combination of persistently lower rates, seasonably favorable factors and a relatively low valuation puts the company in a very attractive position with the recent pullback. $50 looks highly likely during Q2, which would put the stock within a frame of the average return of 50% for the 1st half of the year. Should interest rates persistently move lower in Q2, $60+ is not out of the question. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained...
Bullish With A Caveat
Thus far during March, I haven't been shy about expressing my bullish feelings about how this final month of Q1 will play out. March will more than likely go out with a bang, not a whimper. What this means, specifically, is that the current pullback we have experienced is a buying opportunity within the greater bull trend. This bullish opinion does come with a caveat, however. The purity of the uptrend since the December lows has been compromised at this point. In other words, the remainder of the month, while being generally bullish, will be a choppy affair. The bulk of the gains has the potential to occur in a very short time-frame, more than likely during the last week of the month, as fund managers rush in to "dress" their under-invested portfolios, giving the appearance of not being completely behind the curve of one of the greatest starts to a calendar year on record. Believing that the markets will be more chop than substance for the next week or two, the most prudent path would be to cut down on trading new positions and focus on trading around core positions. The potential for getting shaken out of new trading positions, racking up a series of small losses, is simply too great given the current texture of the market. The "bang" for March, when it does occur (most likely at month end), has the potential to lift the S&P 500 over 2850. It won't be an inconsequential affair so it's worth staying fully invested in anticipation of. Investors simply have to be willing to cope with what will be, very simply, a frustrating trading environment as we get into the middle of the month. We are down to a three position portfolio currently with COOP, Z and RDFN. That's likely how it will remain for a majority of the month. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which...