There Are Few Things As Reliable As Zillow Outperforming During The 1st Half of Any Year

Zillow is a company that has some very defined seasonal characteristics.

It makes sense. Real estate is a highly cyclical industry not just from a broad macro perspective, but within any calendar year. Spring and summer are traditionally the busiest month for new residential real estate purchases. Zillow tracks these buying patterns almost perfectly.

The stock tracks not just the seasonal characteristics of real estate with uncanny consistency, but it also moves inverse to interest rates. The cost of borrowing to buy real estate as expressed through the ten year yield is just as important a consideration of when and where to buy the stock as the seasonal aspect.

On average, Zillow returns 50% during the first half of the year with remarkable consistency. The only time it has been down during the first half of the year was during 2015, a year when rates rose 7.6% from the beginning of the year through the end of Q2.

Here is a look at first half performance in each year since the stock went public with the ten year yield plotted (blue) to further demonstrate its negative correlation to rates.

Zillow 1st Half 2012 Return +71%

zillow vs rates 1h 2012
Zillow 1st Half 2013 Return +103%
zillow vs rates 1h 2013
Zillow 1st Half 2014 Return +75%
zillow vs rates 1h 2014
Zillow 1st Half 2015 Return -18.08%
zillow vs rates 1h 2015
Zillow 1st Half 2016 Return +41%
zillow vs rates 1h 2016
Zillow 1st Half 2017 Return +33%
zillow vs rates 1h 2017
Zillow 1st Half 2018 Return +47%
zillow vs rates 1h 2018
Zillow 1st Half 2019 Return +19% as of 3-15-2019
zillow vs rates 1h 2019

Further, the last time Zillow traded at a multiple of 6x revenues was 2016, a year that saw the stock return 41% during the first half of the year.

zillow price to sales

A combination of persistently lower rates, seasonably favorable factors and a relatively low valuation puts the company in a very attractive position with the recent pullback. $50 looks highly likely during Q2, which would put the stock within a frame of the average return of 50% for the 1st half of the year. Should interest rates persistently move lower in Q2, $60+ is not out of the question.

 

Disclaimer
This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice.
This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website.
T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the specific products, services, strategies, or issues posted herein with a professional advisor of his or her choosing.
Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding capital markets or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in, the transmission thereof to the user. With respect to information regarding financial performance, nothing on this website should be interpreted as a statement or implication that past results are an indication of future performance.

Author: admin

Share This Post On