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Zillow (Z) Plans to Do to Real Estate What Amazon (AMZN) Did to Retailing

Touchstone Sands Capital Institutional Growth Fund recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -9.45% for the quarter, outperforming its benchmark, the Russell 1000 Growth Index which returned -14.10% in the same quarter. You should check out Touchstone Sands Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Touchstone Sands Capital highlighted a few stocks and Zillow Inc (NASDAQ:Z) is one of them. Zillow is an online real estate database company. Year-to-date, Z stock gained 4.1% and on May 14th it had a closing price of $47.46. Its market cap is of $10.3 billion. Here is what Touchstone Sands Capital said:

“Zillow is a leading digital-services provider for the real-estate industry. We believe the company will leverage its brand, industry experience, and new Offers business to digitize the entirety of the home buying and selling process, move closer to the transaction, and take a greater share of each home purchase that it facilitates. With a solid base in its legacy business (serving home-buyer leads to realestate agents), Zillow has launched a new business, Zillow Offers, which purchases homes directly from sellers. While this is seemingly a low-margin, capital-intensive business, the reality is that Offers enables Zillow to enter multiple high-margin business lines including mortgage origination, title and escrow services and, we believe, a seller-leads business to complement the existing buyer-leads business. Over the long term, we envision Zillow evolving from a site that provides home-value data to one where consumers can shop for agents, related services, and even buy and sell homes directly: a true digital real-estate marketplace, similar to other ecommerce platforms.”

As you can see Touchstone Sands Capital believes that Zillow plans to do to real estate what Amazon.com Inc. (NASDAQ:AMZN) did to retailing. In Q4 2019, the number of bullish hedge fund positions on Z stock decreased by about 12% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Z’s growth potential.

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

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