Below is a note from Hedgeye CEO Keith McCullough on why we're adding Realogy (RLGY) to Investing Ideas today:
On the heels of another bullish US economic data point this morning (US Consumer Confidence accelerated, again, to 98.0 in APR vs. 96.9 in MAR per the Univ. of Michigan reading), the market is offering us yet another buying opportunity at yet another higher-low within a bullish intermediate-term TREND view for US #GrowthAccelerating.
One of Josh Steiner and Christian Drake's favorite new ways to play the "high-end" consumers in the USA is Realogy (RLGY). Here's an excerpt from their most recent Institutional Research presentation:
- Building (Positive) Pressure: There is growing potential energy in the Housing market on both the new and existing home fronts. Look no further than the recent spate of data for signs of transitioning towards either good or less bad. If rates have already priced in the March increase and multiple hikes in 2017 and if the primary constraint to volume growth in both the new and existing markets is supply based, we can expect the release valve to manifest in the form of higher Home Prices.
- High End Housing Rebound? The High-End segment has been battered over the past few years alongside muted financial asset price inflation and a general slowdown in high-ticket discretionary consumption, but luxury spending trends are showing signs of life of late. This bodes well for Realogy, especially its NRT segment which includes the high end brands Corcoran and Sotheby’s, and is concentrated in more affluent areas.
- Positive Operating Leverage & Cheap Valuation: Realogy is cheap, and while cheap can get cheaper is our oft-touted maxim here at Hedgeye, the potential for earnings to beat expectations over the next two years is great while the potential for them to miss is small.
