5 Best Real Estate and Realty Stocks to Buy According to Hedge Funds

In this article, we discuss the 5 best commercial real estate stocks to buy according to hedge funds. If you wish to go through our detailed analysis of the real estate market, check out the 12 Best Real Estate and Realty Stocks to Buy According to Hedge Funds.

5. CoStar Group, Inc. (NASDAQ:CSGP)

Number of Hedge Fund Holders: 43

CoStar Group, Inc. (NASDAQ:CSGP) is a Washington, DC-based provider of information, analytics, and marketing services to the commercial property industry in the United States, Canada, the United Kingdom, France, Germany, and Spain. Its research services include online services and research for the rental home and hotel industry.

Insider Monkey looked through 943 hedge fund holdings for Q1 2023 and found that 43 had invested in the firm. CoStar Group, Inc. (NYSE:CSGP)’s largest investor is Charles Akre’s Akre Capital Management with a $489.6 million stake.

Baron Real Estate Fund made the following comment about CoStar Group, Inc. (NASDAQ:CSGP) in its first quarter 2023 investor letter:

“Shares of CoStar Group, Inc. (NASDAQ:CSGP). declined 11% in the first quarter of 2023 after performing well on a relative basis last year. We attribute the stock’s decline to management announcing a dramatic increase in its investment to grow its residential business. Despite the decline, we remain optimistic about the long-term prospects for CoStar and acquired additional shares late in the first quarter.

CoStar is the leading provider of information, analytics, and marketing services to the real estate industry. CoStar initially focused on serving the domestic commercial real estate industry and built a comprehensive proprietary database of essential data to help participants buy, sell, and lease properties. The company has since expanded its focus to offer products and services to multi-family, industrial, commercial land, mixed-use and hospitality end-markets across North America and Western Europe.

Today, the company’s non-residential operations generate over $2 billion of recurring revenue with cash flow (EBITDA) margins above 40%. We expect this portion of the business to grow its revenue at a mid-teens rate for several years as the company launches new products, upsells existing customers, and raises prices. We expect profit and cash flow to grow at an even faster rate given the low marginal costs inherent in CoStar’s business model. We think that cash flow from this business can double over the next five years, which implies a similar return for the stock…” (Click here to read the full text)