Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Regardless of what's going on in the market, there is one class of customer that is immune to its shifts.
The super-rich.
Back in 1926, F. Scott Fitzgerald wrote, "Let me tell you about the very rich. They are different from you and me." It's as true today as it was then, especially in terms of how they respond to inflation.
Simply put, they don't.
With the very real prospect of paying more at the pump for fuel and food, and with rising interest rates causing just about everything to be more expensive, most people might be inclined to put off certain purchases, like buying a house.
Housing prices went up about 18% in 2021 nationally, which is well above the historical baseline growth rate of a few percentage points. The higher prices could cause many people to hesitate on a move-up or first-time purchase of a home.
The super-rich don't think that way.
If they want a new house, they buy a new house. They don't worry about how much the price has gone up or what the current 30-year mortgage rate is, or if the stock market is down, or if the economy is slowing.
Companies geared toward meeting the market needs of the super-rich tend to be on my radar when the market is volatile, because they weather the hits better than most and bounce back quickly.
One such firm, a real estate broker that serves high-end markets, combines a strong balance sheet with very little debt and double-digit growth... but it's going unnoticed by the usual suspects that cover the comings and goings of Wall Street.
That creates an opportunity for you. It's time to adopt this orphan stock before the rest of the world recognizes the value of this company...
Selling Luxury Properties Since 1911
A quick look through the listings of Douglas Elliman Inc. (NYSE: DOUG) will tell you exactly what kinds of clients it serves:
A nice 12-bedroom home on a 53,696 square foot lot with 134 feet of water frontage for a mere $55 million in Indian Creek, Fla.
In Bal Harbor, Fla., a quaint 9-bedroom house with 178 feet of water frontage for just $50 million.
If the beach is not your thing, a 41st-floor penthouse at 15 Central Park West that can be yours for a mere $410 million.
You get the idea.
It's the sixth biggest real estate brokerage firm in the United States, practically dominating the New York City luxury market.
Business is really good this year - 2021 revenue was up 75% to $1.31 billion for the full year. Cash flows increased by over 400% year over year. In addition, the firm closed $51.2 billion of luxury real estate deals compared to $29.1 billion in 2020.
The surprising thing is, no one cared.
Shares of Douglas Elliman were spun off last year by Vector Group Ltd. (NYSE: VGR), a tobacco company that had invested its cash flow in real estate related assets and companies for years, becoming a diversified holding company. They decided late last year that the best way to unlock the value of Douglass Elliman was to spin it off as a free-standing company.
Many institutional investors who wanted to own the tobacco business sold the real estate company's shares without giving it a second glance. So did all the index funds that owned VGR shares. There is little Wall Street coverage, and you can go weeks and even months without hearing this company's name on CNBC or other financial networks.
Douglas Elliman, at this point, is basically an orphan stock. But I think this is going to change in the near future.
Why You Need to Buy DOUG Now
The bottom line is, DOUG is one of the leading high-end real estate brokerage firms in the world. In addition to its domestic offices, it has a relationship with Knight Frank, a global real estate company that gives it access to international luxury listings.
Douglas Elliman Development Marketing works with leading developers and architects to build, market, and manage high-end real estate projects in domestic and international markets. This division also manages and acts as a sales force and leasing agent for the projects.
It can also offer property management, title services, escrow services, and arrange for a mortgage for its investors.
A large investment in property technology allows it to serve its customers and clients faster and more efficiently. Its agents can be plugged in 24/7 from anywhere in the world, with a customer support platform that allows Douglas Elliman to help its clients with everything they need to manage the move, including insurance, movers, telecommunications, utilities, solar, home security, and home services.
The company is valued at 10 times earnings and less than $0.50 on the dollar of revenue. But shares are only trading at around $7.
Frankly, that's ridiculous.
The stock should be trading for at least double the current price based on current sales and profits.
Given its astonishingly fast growth, that valuation should continue to move higher over time. The super-rich do not care about silly little things like recessions and interest rates, so the company is much more stable than traditional real estate firms.
By the end of 2023, I expect to see this stock triple from its current levels.
The only thing that could curb that somewhat is if large private equity firms and other investors follow my line of reasoning, see the value, and begin adding DOUG to their portfolios. But even in that scenario, we're still talking about a potential doubling from its current price, up to where its fair market value should be now.
While this is a great opportunity in the stock market, safeguarding your profits during high volatility requires diversifying your portfolio. These days, savvy investors need to go further than public equities. And there's one opportunity right now that has the potential to build lasting, generational wealth.
I'm talking about startups. Remember: Big names like Amazon, Apple, and Facebook all started as entrepreneurial ventures, and all of them are now tentpoles for the global economy. They didn't do that on their own. Angel investors played a huge part in helping those companies achieve enormous success.
I know an angel investor on a bold mission to find the Apples and Amazons of tomorrow and guide investors like you to the best potential opportunities for literally lifelong returns.
You can get all the details here.
Follow Money Morning on Facebook and Twitter.
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.