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2 Stocks I Bought Last Week, 1 Stock I Sold

By Rick Munarriz - Feb 14, 2018 at 1:44PM

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I took advantage of market volatility earlier this month to buy Redfin and Teladoc, as well as selling SeaWorld Entertainment.

I'm not afraid of market volatility. Swinging prices provide investors with opportunities to get in -- or out -- of stocks, and I did exactly that last week when equities were correcting. 

I bought into two companies that I've been admiring at a distance for months, initiating positions in Redfin (RDFN 7.83%) and Teladoc (TDOC 3.53%). I also emptied the tank by selling my stake in SeaWorld Entertainment (SEAS 2.95%). My portfolio's an open house, so let's get into why I bought what I bought and sold what I sold last week.

A Redfin For Sale sign in front of a home.

Image source: Redfin.

Buying Redfin

The Redfin model has intrigued me for years, and when it went public at $15 last summer, I was ready to pull the trigger. However, with the stock price as high as $33.94 on its fifth trading day, I figured I missed my chance. The company that was disrupting the real estate brokerage market was no longer a fixer upper. I finally took the plunge when the stock fell to the high teens last week during the market correction. 

Redfin is an online savvy real estate broker that's shaking up the way brokers are compensated and fees are paid. It hires salaried real estate professionals, unlike the rest of the industry that is heavily incentivized by commissions. Redfin is able to shave listing fees and commissions that it then passes on to the buyers and sellers at a transaction's closing.

The model is resonating with buyers and sellers alike. Revenue soared 35% in its first quarter as a public company, repeating the feat three months later. Adjusted profitability is growing even faster. Redfin is gaining market share, and its only limitation is its ability to expand as it needs to establish a physical presence in every market it enters. 

Buying Teladoc

Teladoc is another company that went public last year, but the fast-growing telehealth provider actually hasn't taken much of a beating. Teladoc hit a new high two weeks ago, and getting in last week when prices were dropping wasn't as big a markdown as I got on Redfin. 

It's hard not to like Teladoc, even if I don't consider myself as astute as many of my colleagues in sizing up healthcare stocks. Teladoc replaces costly in-office visits with online visits for physicians and mental-health professionals. The video calls have their limitations, but many basic visits and consultations can be accomplished through telemedicine.

Teladoc is a win-win at a time when healthcare costs are spiraling. A third-party study showed that Teladoc saved clients -- and its clients are the corporations that supplement traditional health insurance coverage this way -- roughly $472 per member visit along with $46 in average employee productivity. Patients don't have to waste hours in stuffy waiting rooms, as the average wait for a virtual appointment is only 10 minutes.

It's still early in this niche. Teladoc is the top dog in this field, yet it only completed about 1.46 million visits last year (up 53% since the prior year). Teladoc gets paid through member subscriptions and per-visit fees, but usage and revenue are skyrocketing. Revenue has more than doubled in the latter half of 2017, and there will be more clarity on its latest quarter when Teladoc reports in two weeks.

Selling SeaWorld Entertainment 

I'm a theme park enthusiast, and I feel I have a firm grasp on the pros and cons of SeaWorld. The company behind the controversial namesake marine-life parks has struggled to recover since 2013's Blackfish skewered attractions with orcas in captivity. SeaWorld has been a financial and attendance laggard for years. I bought at nearly $18 in late 2014 and then more than doubled my position when the stock dropped to $13 in summer 2016 because of the stock's valuation relative to its peers. I'm also optimistic about SeaWorld's other properties including its Busch Gardens, Sesame Place, and Aquatica parks.

I feel that SeaWorld will eventually strike the right balance at its namesake parks that appeases protestors without alienating its fan base. Adding marquee rides and festivals will help wean the parks off of their controversial sea life shows.

I still sold last week, as the shares held up well during the correction and are trading nicely higher in 2018. I was able to get out with a meager overall gain to my combined cost basis, and that's not too shabby given how bad things are at SeaWorld these days. I still see SeaWorld as a compelling buyout candidate this year and I may buy back in at some point, but for now I'm out and looking to put the proceeds to use elsewhere.

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Stocks Mentioned

SeaWorld Entertainment, Inc. Stock Quote
SeaWorld Entertainment, Inc.
$57.56 (2.95%) $1.65
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$32.85 (3.53%) $1.12
Redfin Corporation Stock Quote
Redfin Corporation
$11.16 (7.83%) $0.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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