Longleaf on Realogy Holdings (RLGY): ‘From Worst to Being the Best Contributor’

Longleaf Partners Small-Cap Fund, an independent investment management firm, published its fourth quarter 2020  investor letter – a copy of which can be downloaded here. A return of 17.56% was recorded by the fund in the fourth quarter of 2020, below its Russell 2000 benchmark that delivered a 31.37% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Longleaf Partners Small-Cap Fund, in their Q4 2020 investor letter, mentioned Realogy Holdings Corp. (NYSE: RLGY) and emphasized their views on the company. Realogy Holdings Corp. is a Madison, New Jersey-based real estate and relocation services company that currently has a $1.8 billion market capitalization. Since the beginning of the year, RLGY delivered a 16.23% return, impressively extending its 12-month gains to 367.79%. As of March 26, 2021, the stock closed at $15.25 per share.

Here is what Longleaf Partners Small-Cap Fund has to say about Realogy Holdings Corp. in their Q4 2020 investor letter:

“Realogy Holdings (36%, 1.47%; 39%, 1.83%), the residential real-estate brokerage franchisor, was a top contributor in the quarter and a strong performer for the year, after starting the year as a top detractor in 1Q. The company generated over $3 of FCF in the last quarter (against a $14 share price). Realogy fee revenues have benefitted from recent national surges in home sales and home prices. Realogy outperformed the industry’s 23% year-over-year volume growth with an excellent 28% quarter after previously lagging. The bear case has argued that iBuyers and other new digital models will quickly disrupt Realogy’s human brokers and their traditional fee take-rates, but there are no signs of near-term obsolescence. CEO Ryan Schneider has navigated the company well through a challenging year and most recently used the company’s strong FCF to pay down net debt towards a more sustainable 4.0x net debt/EBITDA level.”


Our calculations show that Realogy Holdings Corp. (NYSE: RLGY) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Realogy Holdings Corp. was in 26 hedge fund portfolios, compared to 27 funds in the third quarter. RLGY delivered an 8.70% return in the past 3 months.