Is Realogy Holdings Corp. (RLGY) A Great Investment?

Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Small-Cap Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners Small-Cap Fund added 1.91% in the fourth quarter, roughly in line with the Russell 2000’s 2.14% return. For the year, the Fund returned 11.18%, falling short of the Russell 2000, which returned 14.82%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Longleaf Partners Small-Cap Fund Commentary, in its Q4 2021 investor letter, mentioned Realogy Holdings Corp. (NYSE: RLGY) and discussed its stance on the firm. Realogy Holdings Corp. is a Madison, New Jersey-based real estate and relocation services company with a $1.8 billion market capitalization. RLGY delivered a -5.77% return since the beginning of the year, while its 12-month returns are down by -0.50%. The stock closed at $15.84 per share on January 21, 2022.

Here is what Longleaf Partners Small-Cap Fund Commentary has to say about Realogy Holdings Corp. in its Q4 2021 investor letter:

Realogy (28%, 1.94%; -4%, -0.22%), the real estate brokerage franchisor, was also a top contributor for the year. Commission volumes increased double-digits due to 17% year-over-year (YOY) home price appreciation outweighing 5% fewer transactions. With the majority of the company’s value coming from its franchise fees, the incremental margins on sales growth are extremely favorable. Realogy’s brokerages (including Coldwell Banker, Century21, and Sotheby’s) also gained share for the fifth consecutive quarter. The company had lagged the national market last year due to its greater New York and California exposure, but both markets have rebounded well and appear likely to continue. CEO Ryan Schneider used the large FCF coupon to pay down debt, and Realogy’s leverage ratio is now down to a conservative 2.3x net debt/EBITDA vs. >5x in prior years. The strong performance suggests that the business was not disrupted by iBuyers and other new competitors as bears had predicted. With the housing market looking healthy and home prices likely to keep appreciating moderately, this franchisefee annuity business with high defensible market share should be worth much more than the 6x forward FCF where it trades.”

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Our calculations show that Realogy Holdings Corp. (NYSE: RLGY) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. RLGY was in 20 hedge fund portfolios at the end of the third quarter of 2021, compared to 18 funds in the previous quarter. Realogy Holdings Corp. (NYSE: RLGY) delivered a -19.96% return in the past 3 months.

In August 2021, we also shared another hedge fund’s views on RLGY in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.