Regular readers of mine will know there are more than a few problems with today's housing market. But some problems can be very profitable for you...
Millennials are finally entering the housing market and are now the largest percentage of new buyers according to the National Association of Realtors. The problem is that they are arriving just as a shortage develops and prices have made affordability an issue, especially for first-time homebuyers.
One thing we know about housing shortages is that, although it takes some time, eventually builders will deliver houses that meet the demand. Right now, they are making the most money building and selling higher-end homes.
But the builders will eventually move down the price curve to meet the high demand for entry-level and mid-market homes once it's clear they can make more money that way.
That's a scenario that will prove very lucrative to some real estate firms, and the right real estate stock will be a profitable addition to your portfolio too...
The Gains on This One $10 Stock Alone Could Earn You Enough to Retire - Click Here Now for Details
Real estate agents are doing great right now selling high-end homes, and they will be even busier when the more reasonably priced products begin to find their way into the market. Selling a product that is high demand is pretty good for salespeople, and I think the real estate brokerage business could be pretty good for a long time.
Fortunately for us, current uncertainty about the near-term future of housing prices is providing an opportunity to get a cut of a significant percentage of homes sold over the next few years at a bargain price.
With demand outpacing supply, this company is expected to grow earnings by about 20% a year over the next five years.
That's three times better than its overpriced competition too...
The One Real Estate Stock to Own Right Now
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Realogy Holdings Corp. (NYSE Arca: RLGY) is the leading provider of residential real estate services in the United States with both franchised and company-owned real estate brokerage offices.
While you have never seen a Realogy Real Estate sign in your neighborhood, you are almost certainly familiar with them.
Companies including Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA, Sotheby's International, and Better Homes and Gardens Real Estate all have one thing in common. They are all owned by Realogy and together cover the real estate market from the entry-level home to most exclusive estates. All together they employ 190,000 real estate agents in the United States and another 98,200 around the world.
And Realogy's business model isn't just selling homes. Realogy doesn't view the home buyer as their customer.
Their customers are the agents that represent their brands, and so management focuses on providing tools that help real estate agents sell homes. Their growth will come from growing their pool of real estate agents and helping them sell homes and build their careers.
There is a real opportunity there too. You see, 51% of all real estate agents in the United States are not affiliated with a brand, so successful recruiting by Realogy can drive significant growth for the company. In fact, most Wall Street analysts think the company will grow earnings by about 20% a year for the next five years.
And you can buy into that growth potential for just a fraction of what it's really worth.
In spite of the strength of their brands and the opportunities that will be created as the housing markets slowly change over the next decade, we can buy the shares at bargain prices right now.
We are paying just seven times free cash flow for a stake in the leading real estate services company. That's about half the free cash flow price tag of competitors like RE/MAX Holdings (NYSE: RMAX) even though Realogy is expected to grow three times as fast in the next five years.
Plus, our proprietary stock rating tool says RLGY stock is an incredible buying opportunity now. RLGY has a perfect Money Morning VQScore™.
Management is determined to reward patient shareholders too.
Last year they paid out $49 million in dividends and bought back $276 million of stock. The board recently approved another $350 million buyback that should help provide some support for the stock.
But the "problem" in the housing market I talked about earlier is their best catalyst.
There is far more demand for homes than there is supply, and any salesperson will tell you that selling items in high demand is a profitable endeavor. The demand is not going away any time soon as millennials are beginning to develop an interest in buying homes for the first time since the credit crisis. Even my seemingly marriage-resistant 30-year-old son expressed the idea last week that he thought he wanted to buy something of his own after renting all his adult life.
It is not often that you can buy a company that is a leader in its field, an industry that should see powerful long-lasting tailwinds for a very long time at a bargain valuation.
Most Investors Believe This Great Lie (Don't Be One of Them)
There's an old market adage that tells us "you can't time the market."
And most individual investors believe it – believe it in their hearts.
They believe there are only two kinds of markets – a bull market where stocks go up, and a bear market where stocks go down.
You make money in a bull market, the thinking goes, and you lose money in a bear market.
According to this line of reasoning, "timing the market" means you're either "in" stocks – or are out and on the sidelines. And if you get that "timing" wrong – you're going to get hosed.
Well, here's the thing: This bit of "wisdom" is one of the biggest lies the professional investing crowd has foisted off on Main Street investors.
And it could cost you millions.
Instead, there's a simple way for you to outsmart Wall Street at its own game – and capitalize on the ability to be nimble and fast-acting. If you follow this method, you could soon find yourself running circles around the mega-investment banks.
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About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.