1/ IT'S THREAD TIME!
After spending the entire weekend reading and thinking about one company, it's time to share my thoughts.
$RDFN REDFIN CHECKS ALL THE BOXES FOR A POTENTIAL MULTIBAGGER and I'm going to explain why below.
Note: RDFN is set to release earnings May 5
After spending the entire weekend reading and thinking about one company, it's time to share my thoughts.
$RDFN REDFIN CHECKS ALL THE BOXES FOR A POTENTIAL MULTIBAGGER and I'm going to explain why below.
Note: RDFN is set to release earnings May 5
2/
Redfin describes itself as a "technology-powered real estate company."
Their mission says it all: To redefine real estate in the customer's favor.
$RDFN currently has a 5 prong business model:
Redfin describes itself as a "technology-powered real estate company."
Their mission says it all: To redefine real estate in the customer's favor.
$RDFN currently has a 5 prong business model:
3/
Redfin Brokerage: List your home on Redfin and they’ll collect 1.5% of the sale
Redfin Concierge: RDFN will fix up your home and list it and collect 2.5% of the sale
Redfin Brokerage: List your home on Redfin and they’ll collect 1.5% of the sale
Redfin Concierge: RDFN will fix up your home and list it and collect 2.5% of the sale
4/
RedfinNOW: RDFN’s iBuying program; will buy your home for an all-in fee of 6-12%, at fair market value
RentPath: They acquired this business recently; they operate leading property rental websites bringing potential renters to the RDFN website
RedfinNOW: RDFN’s iBuying program; will buy your home for an all-in fee of 6-12%, at fair market value
RentPath: They acquired this business recently; they operate leading property rental websites bringing potential renters to the RDFN website
5/
Redfin Title/Mortgage: They offer mortgage origination and title services to customers
Redfin Title/Mortgage: They offer mortgage origination and title services to customers
6/ Great Leadership☑️
Redfin is lead by a passionate and optimistic leader named Glenn Kelman. Although not the founder, Kelman has been with Redfin since 2005 (RDFN founded in 2004) and helped build the company from the ground up.
Redfin is lead by a passionate and optimistic leader named Glenn Kelman. Although not the founder, Kelman has been with Redfin since 2005 (RDFN founded in 2004) and helped build the company from the ground up.
7/
To me, he definitely has an owner mindset and has positioned RDFN to be customer-centric. He has a CEO approval rating on Glassdoor of 87%. Kelman currently owns about $105M worth of RDFN stock so his personal financial interests are definitely aligned with shareholders.
To me, he definitely has an owner mindset and has positioned RDFN to be customer-centric. He has a CEO approval rating on Glassdoor of 87%. Kelman currently owns about $105M worth of RDFN stock so his personal financial interests are definitely aligned with shareholders.
8/
He is the 6th highest-paid employee at RDFN which is rare for a CEO who generally is the highest-paid employee (no PAY EGO). I urge you to search for Kelman interviews on YouTube and you’ll see why I like him so much. He’s currently 49 years old and should be around a while.
He is the 6th highest-paid employee at RDFN which is rare for a CEO who generally is the highest-paid employee (no PAY EGO). I urge you to search for Kelman interviews on YouTube and you’ll see why I like him so much. He’s currently 49 years old and should be around a while.
9/ Huge Addressable Market☑️
The real estate brokerage business is a $93B market in the USA (2021) based on 5% commission; Keller Williams currently #1 with a 10% market share. inman.com/2021/02/16/kel…
The real estate brokerage business is a $93B market in the USA (2021) based on 5% commission; Keller Williams currently #1 with a 10% market share. inman.com/2021/02/16/kel…
10/
The U.S. mortgage market is the largest in the world at $11T (Rocket has an 8% market share)
Can RDFN capture 7-10% of the market with its tech-first, customer-focused-first offering by 2030? I think so!
The U.S. mortgage market is the largest in the world at $11T (Rocket has an 8% market share)
Can RDFN capture 7-10% of the market with its tech-first, customer-focused-first offering by 2030? I think so!
11/
Rule Breaker Qualities☑️
The industry standard is still a 6% commission when selling a home; many years of employment savings for most sellers. Imagine paying a $36K comm on a $600K home, how long would it take you to save $36K after tax and expenses? RDFN charges half!
Rule Breaker Qualities☑️
The industry standard is still a 6% commission when selling a home; many years of employment savings for most sellers. Imagine paying a $36K comm on a $600K home, how long would it take you to save $36K after tax and expenses? RDFN charges half!
12/
The company's brokerage business leverages technology to make selling homes more efficient and passes some of the savings on to customers.
The company's brokerage business leverages technology to make selling homes more efficient and passes some of the savings on to customers.
13/
More than 80% of home tours of Redfin-listed homes are scheduled automatically, and over 65% of its agents can write offers directly from their phone, just to name a few efficiency advantages.
More than 80% of home tours of Redfin-listed homes are scheduled automatically, and over 65% of its agents can write offers directly from their phone, just to name a few efficiency advantages.
14/
In 2019, 52% of buyers found the home they eventually purchased on the internet, only 29% found the home through a real estate agent.
In 2019, 52% of buyers found the home they eventually purchased on the internet, only 29% found the home through a real estate agent.
15/
RDFN onducted over 21,000 video tours in the fourth quarter. Since the start of the pandemic in March, Redfin has seen a 137-fold increase in monthly requests for video tours and a nearly 7-fold increase in monthly views of 3D walkthroughs on Redfin.com.
RDFN onducted over 21,000 video tours in the fourth quarter. Since the start of the pandemic in March, Redfin has seen a 137-fold increase in monthly requests for video tours and a nearly 7-fold increase in monthly views of 3D walkthroughs on Redfin.com.
16/
I could go on and on about RDFN’s technology but you can find it all here: press.redfin.com/technology
I could go on and on about RDFN’s technology but you can find it all here: press.redfin.com/technology
17/
Strong Consumer Appeal & Customer First Focus☑️
Redfin's website has four times the traffic of its next closest brokerage competitor.
Redfin is ranked #68 in US internet traffic and engagement.
Strong Consumer Appeal & Customer First Focus☑️
Redfin's website has four times the traffic of its next closest brokerage competitor.
Redfin is ranked #68 in US internet traffic and engagement.
18/
Redfin's mobile apps and website reached a record of 44 million average monthly users in the fourth quarter. For the year, Redfin reached a record of more than 42 million average monthly users, an increase of 28% compared to 2019.
Redfin's mobile apps and website reached a record of 44 million average monthly users in the fourth quarter. For the year, Redfin reached a record of more than 42 million average monthly users, an increase of 28% compared to 2019.
19/
Redfin gets 54% more repeat customers than other brokerages (2021 Investor Presentation)
Redfin agents are employees not commission salespeople so there is no “hard sell” or pressure to put customers in the wrong home.
Redfin gets 54% more repeat customers than other brokerages (2021 Investor Presentation)
Redfin agents are employees not commission salespeople so there is no “hard sell” or pressure to put customers in the wrong home.
20/
Looks Overvalued☑️
Current fiscal year forward P/E ratio of 2,358
Based on 2020 data, RDFN trades at roughly 8.25 times sales with ONLY 26% Gross Margin.
Looks Overvalued☑️
Current fiscal year forward P/E ratio of 2,358
Based on 2020 data, RDFN trades at roughly 8.25 times sales with ONLY 26% Gross Margin.
21/
Proven Execution☑️
Revenue has more than quadrupled since 2015, while Redfin's share of the home selling market has more than doubled.
Since 2015, RDFN has more than double its US brokerage market share from 0.44% to now over 1%
Proven Execution☑️
Revenue has more than quadrupled since 2015, while Redfin's share of the home selling market has more than doubled.
Since 2015, RDFN has more than double its US brokerage market share from 0.44% to now over 1%
22/
Past Price Performance☑️
RDFN stock price is up 226% since its IPO in 2017 compared to up 69% for the S&P 500 over the same period.
Past Price Performance☑️
RDFN stock price is up 226% since its IPO in 2017 compared to up 69% for the S&P 500 over the same period.
23/
Optionality☑️
Redfin also has a mortgage origination business (known as Redfin Mortgage), which originates mortgages in 56 markets in 20 U.S. states.
Optionality☑️
Redfin also has a mortgage origination business (known as Redfin Mortgage), which originates mortgages in 56 markets in 20 U.S. states.
24/
Mortgage isn't a large portion of Redfin's business (yet), but there's a ton of potential in cross-selling services to homeowners who list or buy homes through Redfin's platform.
Mortgage isn't a large portion of Redfin's business (yet), but there's a ton of potential in cross-selling services to homeowners who list or buy homes through Redfin's platform.
25/
Redfin Mortgage was the #1 lender for Redfin buyers in 10 states. Imagine the potential if RDFN can get to 5-10% brokerage market share and operate Redfin Mortgage in every state.
Redfin Mortgage was the #1 lender for Redfin buyers in 10 states. Imagine the potential if RDFN can get to 5-10% brokerage market share and operate Redfin Mortgage in every state.
26/
If you want to know how large an opportunity this is. Rocket Companies ($RKT), aka Rocket Mortgage did over $15B in revenue in 2020.
If you want to know how large an opportunity this is. Rocket Companies ($RKT), aka Rocket Mortgage did over $15B in revenue in 2020.
27/
Redfin's ibuying business has real potential: If the company could account for just 1% of the roughly 6 million annual existing-home sales in the U.S. & operate profitably, it could contribute in a big way. In 2019, $RFDN ibuying market share was 2% versus 64% for $OPEN
Redfin's ibuying business has real potential: If the company could account for just 1% of the roughly 6 million annual existing-home sales in the U.S. & operate profitably, it could contribute in a big way. In 2019, $RFDN ibuying market share was 2% versus 64% for $OPEN
28/
Acquisition of RentPath driving higher customer value and capturing future brokerage and mortgage customers sooner. RentPath provides an online portal for rental listings, through Rent.com, ApartmentGuide.com, and Rentals.com.
Acquisition of RentPath driving higher customer value and capturing future brokerage and mortgage customers sooner. RentPath provides an online portal for rental listings, through Rent.com, ApartmentGuide.com, and Rentals.com.
29/
RentPath generates $224 million in FY19 revenue. RentPath attracts on average 16 monthly million visitors in 2020. This allows $RDFN to attract a younger demographic.
RentPath generates $224 million in FY19 revenue. RentPath attracts on average 16 monthly million visitors in 2020. This allows $RDFN to attract a younger demographic.
30/
Redfin’s Title Forward operates in 27 markets in 13 states. #1 title company for Redfin buyers in 6 states.
Redfin’s Title Forward operates in 27 markets in 13 states. #1 title company for Redfin buyers in 6 states.
31/
Scale Economics Shared☑️
Redfin charges just 1.5% for its selling services (1% if the customer also buys a home through Redfin), half of what the typical listing agent gets and saving homeowners thousands of dollars in the process.
Scale Economics Shared☑️
Redfin charges just 1.5% for its selling services (1% if the customer also buys a home through Redfin), half of what the typical listing agent gets and saving homeowners thousands of dollars in the process.
32/
Saved homebuyers and sellers over $54 million Q4 and over $185M in 2020.
Number 1 in average sales transactions per agent; 34 transaction sides per agent which are double the next best broker REMAX at 16. Employee agents are way more efficient than commission-based agents.
Saved homebuyers and sellers over $54 million Q4 and over $185M in 2020.
Number 1 in average sales transactions per agent; 34 transaction sides per agent which are double the next best broker REMAX at 16. Employee agents are way more efficient than commission-based agents.
33/
Strong Sales Growth☑️
Over the past 5 years, RDFN has grown revenue at 44% CAGR
Projected revenue growth of 53% for FY2021, 27% for FY2022, and 33% for FY2022
Strong Sales Growth☑️
Over the past 5 years, RDFN has grown revenue at 44% CAGR
Projected revenue growth of 53% for FY2021, 27% for FY2022, and 33% for FY2022
34/
The Capacity to Reinvest (Chuck Akre)☑️
Currently, RDFN only offers mortgage services in 18 states so there is a massive runway to invest in mortgage origination and services.
The Capacity to Reinvest (Chuck Akre)☑️
Currently, RDFN only offers mortgage services in 18 states so there is a massive runway to invest in mortgage origination and services.
35/
Currently, RDFN only has a 2% market share in ibuying (RedfinNOW) and is only available in 5 states and 14 markets (cities).
International expansion opportunities eventually. Currently only in USA and Canada.
Currently, RDFN only has a 2% market share in ibuying (RedfinNOW) and is only available in 5 states and 14 markets (cities).
International expansion opportunities eventually. Currently only in USA and Canada.
36/
$RDFN has a HUGE capacity for reinvesting cash flow in the next decade which has the potential to create a compounding machine!
$RDFN has a HUGE capacity for reinvesting cash flow in the next decade which has the potential to create a compounding machine!
37/
Disclosure: I own shares of $RDFN
I originally started buying them at $18 thanks to @DavidGFool Thanks David!
I dug deeper after reading many posts by @BahamaBen9 Thanks Ben!
Currently, $RDFN is a $7B company and I believe it would get to $100B+ by 2030
Disclosure: I own shares of $RDFN
I originally started buying them at $18 thanks to @DavidGFool Thanks David!
I dug deeper after reading many posts by @BahamaBen9 Thanks Ben!
Currently, $RDFN is a $7B company and I believe it would get to $100B+ by 2030
38/
If you want to read this thread at a later time, I have also posted it on my blog:
mystockvault.com/blog/
I hope I have added some value to your investing journey. Cheers!
If you want to read this thread at a later time, I have also posted it on my blog:
mystockvault.com/blog/
I hope I have added some value to your investing journey. Cheers!
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