5 Reasons CoStar Group, Inc. Trumps Trulia as Best Partner for Realtor.com

Recently reports have surfaced regarding Trulia acquiring Move, Inc. operator of the Realtor.com website.

Jun 20, 2014 at 3:28PM

I recently wrote a Motley Fool article Why Investors Who Like Zillow Should Love CoStar Group, for investors interested in the fast growing real estate technology space. It was syndicated a few days before rumors and reports began circulating regarding Trulia, (NYSE:TRLA) acquiring Move, (NASDAQ:MOVE), operator of Realtor.com.

My article concluded with an observation that CoStar Group (NASDAQ:CSGP) -- rather than Trulia -- would be a great marriage. Here is a quick chart that shows at a glance why Move, looks like a bargain for the other major players in this space:

Beyond the bargain valuation, here are five more compelling reasons why Move should favor CoStar as a partner:

1. CoStar has demonstrated that it can successfully integrate large scale acquisitions
Back in 2012, CoStar consolidated the commercial real estate data and analytics space when it acquired competitor LoopNet, for $860 million. Since the 2012 purchase of LoopNet, CoStar shareholders have been rewarded with returns in excess of 100%.

2. Move would be a great fit as a bolt-on acquisition
CoStar recently structured its operations into five main brands:

  • CoStar-a comprehensive database of commercial real estate information.
  • LoopNet-commercial real estate marketplace for leasing and sales
  • BizBuySell-marketplace focused on business brokerage and sales.
  • LandsofAmerica-marketplace focused upon raw land brokerage and sales.
  • Apartments.com-a consumer oriented site focused on rentals. This acquisition in April 2014 immediately turned CoStar into a competitor for a portion of the residential marketspace.

Acquiring MOVE would be a logical progression for CoStar. Adding residential properties for sale, either as a stand-alone brand, or as a rebranding opportunity for Apartments.com seems like a perfect fit for CoStar.

3. A great opportunity to cross-sell between brands
CoStar's 8 million members surely must include many agents who operate both in the commercial and residential arena.

In fact, many of Costar's 8 million members are likely to be well respected agents who hold industry designations such as the Realtor CCIM, or Certified Commercial Investment Member designation. These are highly respected professionals within the real estate community.

4. CoStar has the bankroll and staff to make this happen
Fellow Fool Brian Nichols recently pointed out that Trulia did not have much dry powder left after a debt offering used at least partially to fund the recent acquisition of Market Leader. On June 9, 2014 CoStar completed a common share offering raising $529 million which can be used for future acquisitions.

Coincidently, MOVE has a current market cap of $587 million.
CoStar has 2,040 employees, approximately double the number of Zillow, Trulia, or MOVE. CoStar seems to have all the bases covered to comfortably make an acquisition of this size.

5. No bad blood
Realtor.com was the first mover in this space. High flying newcomers Zillow and Trulia seem to have garnered much more attention of late. There has also been a lot of finger pointing by the National Association of Realtors, or NAR, and MOVE regarding the accuracy of information, particularly listings, on the other two sites.

Realtor.com gets accurate and timely information updated within minutes after it is received from more than 800 local Realtor multiple listing services, or MLS. Recently, several high profile executives have migrated from MOVE to both Trulia, and more notably Zillow. Lawsuits were filed. Clearly there has been some bad blood.

Investor Takeaway
Any purchase of Move would have to be contingent upon receiving all of the required approvals from the NAR board and the Realtors it represents. NAR also owns a block of MOVE shares of stock.

It certainly would appear that CoStar has the credentials, the cash, the infrastructure, and perhaps the respect of both NAR officers and rank and file members. Even more important is the fact that CoStar is not tarred by the same brush as Zillow and Trulia in the eyes of many real estate agents.

It would be a fresh start, and perhaps an ideal way for Realtor.com to leap ahead of the competition. I also think it would be an excellent opportunity to increase long-term shareholder value for CoStar Group investors. This combination could also represent a credible threat to both Trulia and Zillow moving forward.

Warren Buffett's biggest fear is about to come true
Warren Buffett just called this emerging technology a "real threat" to his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. It won't be long before everyone on Wall Street wises up, that's why The Motley Fool is releasing this timely investor alert. Click here to learn more about what's keeping Buffett up at night and the one public company we're calling the "brains behind" the technology.

Bill Stoller has no position in any stocks mentioned. The Motley Fool recommends CoStar Group and 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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