Gator Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.29% was recorded by the fund for the third quarter of 2021, compared to its benchmarks, the S&P 500 Total Return Index that delivered a 0.58% return, and the S&P 1500 Financials Index that had a 2.61% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Gator Capital Management, in its Q3 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 $2.01 billion market capitalization. RLGY delivered a 2.26% return since the beginning of the year, while its 12-month returns are up by 8.32%. The stock closed at $17.21 per share on January 11, 2022.
Here is what Gator Capital Management has to say about Realogy Holdings Corp. in its Q3 2021 investor letter:
“We like Realogy Holdings (“Realogy” or “RLGY”). Realogy is the parent company of Coldwell Banker and Century 21. We believe the Coldwell Banker name has significant brand value among residential real estate owners. Realogy trades at only 4.4x EBITDA. We think stock market investors are overly concerned about disruption of residential real estate brokerage.
1. Street estimates are too conservative – We believe Wall Street estimates for Realogy in the next 2 years are too conservative because they assume that Q2 2021 was the peak dollar volume period for housing turnover. We believe the housing market will remain strong in 2022 and 2023 as prices continue to increase and the number of housing transactions stays stable or increases marginally.
2. Pandemic beneficiary – Realogy has benefited from the current pandemic-induced housing boom. As the professional class has re-evaluated how they work and how often they commute to the office, many decided to change their living situations. Some have moved to the suburbs in search of more space. Others have moved to remote locations to work from home in low-cost areas or in vacation spots. Realogy has another firm specific benefit. In the previous 5 years, Realogy’s brokerages had lagged due to a concentration to New York city and the suburbs where home prices and activity had lagged. Since the Great Financial Crisis (“GFC”) until the pandemic, homes prices in the New York suburbs had been stagnant. The main reason for the stagnation was the decline in high-paying Wall Street jobs. Wall Street was not creating a new generation that could move to Darian, CT or Summit, NJ to buy over-priced homes from the previous generation of Wall Streeters. With the pandemic prompting people to move to the suburbs, Realogy has benefitted from the resurgence of activity.
3. Demographic beneficiary – The Millennial Generation is in their peak home-buying years. This generation was delayed in their household formation due to the GFC. However, biology waits for no one, and the current crop of 35-40 year-olds are buying homes…” (Click here to see the full text)
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Based on our calculations, Realogy Holdings Corp. (NYSE:RLGY) was not able to clinch a spot in 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 -14.38% 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 Q3 page.
Disclosure: None. This article is originally published at Insider Monkey.
