Market Leader for Real Estate Profits

I have been watching the blood bath that has been the US residential real estate market for a long time. On the one hand, I am grateful that I was not over exposed, and on the other, eager to jump in and take advantage of the opportunities.

But the question has been when and how. Like me, you have probably heard of that Chinese proverb that goes something like "never try and catch a falling knife".

Over the past weeks, news has slowly filtered out that residential real estate sales have either bottomed or are in the process of bottoming (and we all hope that news is right). This news has motivated me to action, albeit cautious action.

I have had a look at the home builders including (among others):

• Toll Brothers (TOL)
• DR Horton (DHI)
• Hovnanian (HOV)
• Pulte (PHM)

But I find it hard to understand the competitive advantage of one over the others. So I turned to suppliers and found myself in a similar situation.

If you are feeling the same way, you may be interested in taking a look at Market Leader (LEDR). They supply software products and services to real estate agents, teams, and brokers.

Now as you can imagine, these real estate agents, teams, and brokers have been doing it tough over the last little while which has adversely affected Market Leader (LEDR). Even with the recent pick up in housing sales, I understand their commissions are still falling.

But as the saying goes, nothing happens unless a sale is made. If the housing market is to recover sales will pick up, so will real estate broker commissions, and so (I hope) will the revenues for Market Leader (LDR).

They have competitors like Move Inc. (MOVE) who run realtor.com etc.that you may want to check out as well.

Personally I felt LEDR was a better place for my money though.

LEDR has approx $2.30 in cash per share and I was able to purchase my shares yesterday for $1.87. Plus they have this software business with revenues of around $30 million a year.

Yes they are making losses - not huge when compared to their pile of cash - and I expect they will become nicely profitable as the real estate market recovers.

There is no debt or refinancing to worry about.

As I said, to me it looked like a safe way to get some exposure to a recovery in the residential real estate market. Have a look - you may like it as well.

Disclosure: Long LEDR

Comments

[Commercial ...:]

To find competitive advantages among homebuilders look at their regional footprints.
Those with infrastructure and a presence in healthier areas will grow first and fastest.
For instance (this is not a recommendation just an observation) HOV has a decent presence and owns many lots in the Washington DC area. There is no recession in Government, Washington is adding jobs. That’s just one way to think about it.

Aug 06 09:56 AM

[User 467587:]

I video I recently watched shows the Austin Texas real estate market is starting to build momentum. Looks like the US might slowly be haded in the right direction now. To watch the video go to:
buffingtonsignaturehom...

Aug 06 02:05 PM

[CM001:]

There are clearly differences and advantages. For example, Pulte focus on active-adult communities, TOL focuses on luxury market, then some builders have more land supply than others, and then some, like DHI, focus on entry level houses. So clearly there are differences. I guess you need to dig little deeper

Aug 07 12:25 AM