Zenolytics Flashback: There Are Few Things As Reliable As Zillow Outperforming During The 1st Half of Any Year
We took profits on our Zillow position on Friday after the company reported an impressive quarter of earnings, further signaling that Real Estate 2.0 has arrived. Zillow is one of the most reliable performers during the first half of any year, bringing in an average gain of 50% during the first half of the year with remarkable consistency. This is a trend we noted in detail in the 2018 note below. What follows is the 2018 note in its entirety. The same note can also be viewed by clicking here. 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. Zenolytics now offers Turning Points Market Intelligence premium service Click here...
Zenolytics Flashback 2018: Making The Case For Gold
Coming into 2020, one of the two events that I had taking place during the year was gold going parabolic. Now that gold is getting there in terms of a parabolic move, it's a good time to flashback to late 2018, when the idea of gold as a long-term investment was presented here in an extensive write-up detailing all of the ways gold could go right in the years ahead. Here is a small excerpt from that note. The link to the full research is at the bottom of the page: Apart from an abundance of data showing that both gold and even more so, gold miners, are absurdly cheap. There is anecdotal data such as the fact that Vanguard recently changed their metals and mining fund name to the “Global Capital Cycles Funds,” taking down exposure to miners to just 25% of the fund from 80%. This leaves Vanguard investors, which, by the way is the largest mutual fund company in the world, with no way to participate in the advance of gold or gold miners. As an aside, the last time Vanguard made a similar move was in 2001, before the secular bull trend in gold started from $300. Needless to say, Vanguard follows demand by its investors. Investors have abandoned the sector, creating a highly asymmetric opportunity. As is usually the case, investors tend to follow each other blindly over the proverbial cliff, without doing much in the way of thinking about liquidating asset classes that are either overwhelmingly in favor or taking positions in sectors that are overwhelmingly out of favor. This leads to vast discrepancies between price and actual value during periods of exuberant enthusiasm and despondent pessimism. The job of the investor is to capitalize on these discrepancies, which is often times an exercise in absolute isolation. The act of buying into despondent pessimism is extremely difficult because you are effectively alone in your opinion, without evidence, other than your own, to substantiate a thesis. For a majority of investors, this is an extremely uncomfortable place. Others tend to thrive, seeking only situations where few other investors are present. T11's strategy dwells heavily in the latter discipline. Gold falls right into the classification of an extremely uncomfortable place where few other investors are present. It doesn't simply stop at gold being a sentiment and value driven play. There are events unfolding in the geopolitical and macroeconomic landscape that leave very few scenarios where gold doesn't appreciate in value: 1. The Fed stops raising rates = dollar bearish/inflationary ramifications/bullish for gold 2. The Fed continues raising rates = substantially...
Flashback 2019: Zenolytics Goes Bullish On AMD
With a soaring performance on Friday, after Intel completely fumbled in their chip delay, AMD has fulfilled the promise (and then some) outlined here a little over a year ago. With our focus now being on all of the investment opportunities presented as a result of The Great Acceleration Cycle, we moved on from AMD sometime ago. However, it's worth noting how far the stock has come in a year's time. What follows is from May 17th, 2019 in a note titled Zenolytics Goes Bullish On AMD. Check that box: The SOX has experienced a ruinous decline during May, falling 11% from its April high, while key components within the average such as XLNX and NVDA have been treated like scraps of red meat for the eagerly awaiting, starving population of bears. In what has been a form of subtle bullish signalling, AMD has refused to to participate in this foray of self-loathing behavior among the semiconductor names, instead choosing to pin itself to recent highs, directly beneath a key trajectory point, while there are very obvious signs of accumulation taking place. In the category of technical imagery, this is the equity equivalent of increasing the throttle on the jets before takeoff. In the midst of this bullish technical dance are a symphony of bubbling positive fundamental developments: Data center revenue has doubled year over year Gross margin expansion Market share expansion versus competitors, specifically: INTC and NVDA A growing list of competitive product offerings targeting high growth markets, including gaming and datacenter markets Potential immediate upside catalyst 2019 Computex Conference May 28-June 1, with the CEO of AMD giving the keynote address Zenolytics is bullish on AMD seeing a test of the 2018 highs at $34 as being imminent, with the possibility of further gains entirely dependent on whether the market gains traction away from the current bearish regime. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. 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...
Zenolytics Flashback: May 2015 – An Issue of Self-Dynamics
The following article was published four years ago, providing insight into how understanding self-dynamics is often more important than understanding market-dynamics. PORTFOLIO UPDATE: AN ISSUE OF...