My Favorite Way to Play a Commercial Real Estate Bounce I noticed that, in the first quarter, Third Point's Daniel Loeb snapped up $452 million worth of shares in CoStar Group (Nasdaq: CSGP), the world's leader in commercial real estate information. That means we can add another big name to the list of powerful investors getting long commercial real estate. When Loeb buys a new stock, I pay attention. Since founding his Third Point hedge fund back in 1996, he has generated an annualized return of more than 15% for his investors. That is after deducting the fees he charges. And now he is buying one of the best-performing stocks of the past two decades. Just look at that stock chart! As you might expect from that mouthwatering 9,000% rise, CoStar Group is a high-quality growth company. The company makes money by selling access to data and providing software solutions and advertising. If you are in the commercial real estate game, you are almost certainly a CoStar customer. Loeb refers to CoStar's business as the "Bloomberg" of commercial real estate. And now CoStar is adding a second growth driver... It is creating a marketplace where commercial properties can be bought and sold online. Currently, only 2% of commercial real estate transactions take place online. That means CoStar is targeting the other 98% of transactions in a $1 trillion market! With these two growth platforms, Loeb sees CoStar as able to grow earnings at a rate in excess of 20% in years to come. That makes CoStar one of the great growth companies that you can buy and hold for the really long term. A recovery in commercial real estate will just add another tailwind. Good investing, Jody |
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