Surely most people are Value investors – who doesn’t want their money to go further?

S

But sometimes the misguided belief that you can buy historic performance needs a reality check.

Like this, the pandemic has led to people spending more on their homes. For many, they’re now our: offices, gyms, restaurants, schools & cinemas.

Less money on commuting & gyms = a larger house 

So do we buy Zillow, the “leading online real estate marketplace company” (in the USA) for $29bn, which in the past 4Q only made $50m in net income off $3.5bn of sales that only grew 8% y/y in the latest Qtr.

Or,

Do we buy the 3rd largest homebuilder for 1/2 the cost (16bn), which generated 30x the net income ($1.5bn) AND grew revenue last Q more than twice as fast + 19%.

Plus which has a 7yr landbank, that is rising in value thanks to high demand & who are buying back shares not dishing them out to employees.

With the homebuilder, you get your money back in under 10 years, with the “capital-light” Zillow, who knows?

Google & Amazon aren’t building houses, but one day they may sell them.

Hombuilder wins, right?

But if you’re buying last year’s performance, you’d buy Zillow because it went up 184%.

14x more than the Homebuilder’s 13%.

So now do you buy historic performance?

or just what makes sense?