How Can Help Investors Avoid Costly Mistakes

An easy way you can use legal insider information to your advantage!

May 1, 2014 at 9:05PM

"... company culture is the hardest thing to quantify, but the most important predictor of where a company is headed."
-- Malcolm Gladwell, from an interview with Motley Fool CEO Tom Gardner

Paying attention to corporate culture can be a game-changer for investor decision making. Last summer, when I wrote Can a Sharp "Move" Deflate Zillow and Trulia?, the facts were correct and most of the conclusions were fairly accurate. However, a bias toward traditional measures like ratios, charts, and industry trends neglected to take into account the vast differences in culture between Zillow (NASDAQ:ZG) and Move (NASDAQ:MOVE), the operator of Competitor Trulia (NYSE:TRLA) seems to occupy the middle ground.

What is
Basically, this is a free peek inside the gold mine. Unless you have actually worked for a company, it is very difficult to evaluate how a corporate culture may provide a significant tailwind or headwind. On the Glassdoor site, both current and former employees have an opportunity to anonymously share feelings about their personal experiences. Employers are able to respond and share points of view as well.

It is a very democratic forum. However, keep in mind that everyone is a participant-observer. In other words, it is impossible for individuals not to be influenced by their own unique experiences, and related biases.

The aggregate Glassdoor company and CEO ratings give investors a quick way to compare companies within an industry. When a majority of current and former employees share similar points of view -- clearly the tribe has spoken.

What did the tribes have to say?
Zillow has a ranking of 4.2/5, with a 97% approval rating of CEO Spencer Rascoff, and 85% of employees would recommend the company to a friend. Move has a ranking of 2.9/5, with a 60% approval rating of CEO Steve Berkowitz, and 38% of employees would recommend the company. Trulia has a ranking of 3.7/5, with an 81% approval rating of CEO Pete Flint, and 66% of employees would recommend the company.

In reading the Glassdoor posts written by Move employees, it becomes clear there is a lot of discontent, and little or no confidence that the company will be successful moving forward. Ethical concerns have also been raised regarding sales quotas being more important than providing service to the company's Realtor customer base.

Alternatively, posts regarding the Zillow culture are very positive, and employees have confidence that the company is headed in the right direction. Even more impressive was that CEO Rascoff took the time to reply to the posts that were from employees who chose to leave, or were troubled by an issue. These were very cogent, thoughtful replies, not just a cursory sentence or two.

Move executives vote with their feet
In an eerily predictable fashion, key executives from Move have recently left the company to work for its two competitors.

Fellow Fool Steve Symington recently reported the unsuccessful Move and NAR legal challenges to prevent Errol Samuelson from joining Zillow as chief industry development officer. His replacement at Move, Curt Beardsley, defected to Zillow just two weeks later.

Trulia recently poached Move's List Hub V.P., John Whitney, in attempt to build MLS partnerships and improve listing accuracy.

Changing of the guard?
Historically, Realtors have controlled the lifeblood of residential real estate sales, the multiple listing services, or MLS. Zillow and Trulia provide consumers with a convenient alternative that allows them to conduct their own initial research. Competitors Move and are quick to point out that they have a more accurate platform. However, they may be missing a crucial point.

Zillow and Trulia have been in operation since 2005, although only publicly traded during the past couple of years. However, they have been perceived by Wall Street to have more nimble and creative business models as they relate to disrupting the traditional buyer-seller-agent paradigm. Shares of Zillow and Trulia have lofty multiples based upon traditional metrics, including price-to-sales ratio. Move is not a cheap stock, but compared to Zillow and Trulia, the market does not appear to view Move and prospects for future growth through the same optimistic lens.

 Z PS Ratio (TTM) Chart

Investor takeaway
Perhaps it is just a coincidence that employee confidence in a CEO tracks with Wall Street expectations. There are many questions for investors to consider prior to making the decision to purchase stock in a new public company. How strong is the balance sheet? What does the competitive landscape look like? Does the earnings forecast support the current valuation? Evidently, corporate culture can be an important variable for investors to consider as well.

The collective opinions of how employees feel about management and the future prospects of a company can be viewed as a valuable insight into a company's culture. This factor was totally absent when I did my initial analysis on Zillow and Move. Looking back, it would have been easy to use a free resource like Glassdoor to do this research.

3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Bill Stoller has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers