Below is a brief note from CEO Keith McCullough on why we're adding Redfin (RDFN) to the short side of Investing Ideas today:
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AFTER the US stock market ramps to all-time highs, HIGH SHORT INTEREST (as an Equity Style Factor) has a central tendency to ramp like this (bears are forced to capitulate and cover high after pressing shorts lower). Obviously with a massive lockup coming off JAN 23, 2018 and RDFN already showing a revenue slow-down from its peak, short sellers have good reason to be on the bear side of this name in particular. Bigger picture, here’s a summary from Josh Steiner and Christian Drake from a recent Institutional Research report: "While the initiatives Redfin is taking are exciting, they come with risk and limited agility to achieving scale. While Mortgage and Redfin Now could end up being exciting businesses for them, it will some time before they are significantly material, assuming Redfin Now makes it out of "experiment" phase. Limited inventory will push demand out of the coastal states and into the middle of the country- something that would not work well for their "1% pricing experiment" given the lower returns per close. This, and constricting affordability, look to be dark backdrops that should pressure agent closings in the out-quarters." Sell green, KM |
