MF is a respectable servise, but they would often fall in love with some average or moderately expensive stock because they liked the management or they thought they could predict the macroeconomic trend, so I don't automatically buy everything they suggest.My main concern here is that the bullish case rests on two assumptions:1. They are the first in the game, therefore they have an edge over the competition.2. There is a global trend of real estate agents moving online.While they may well be right about it, and the stock COULD be a many-bagger, let me suggest that these assuptions are not unassailable.1. Creating a good real estate portal is MUCH easier than creating a good search engine, so Housevalues is not standing apart like Google. And competition is already there. There is Yahoo real estate, there are dozens of sites like realtor.com, there are real estate sections in newspapers (now available online), etc. The absence of a meaningful threat today could simply indicate the tepid demand for the service, rather than Housevalues' competetive advantage. WHEN/IF the segment becomes lucrative, any of the existing listings can decide spend some $$$ on online advertising in an effort to become Number 1.2. It's a mistake to think that real estate agents are that much interested in selling online. The reason is very simple: the customer who buys online is the type of customer that all sales agents hate (go to Delta and Northwest message boards and ask people what they think about Orbitz). Competing with other sales agents in offering the best value to the customer is not the sales agent's idea of doing business. He prefers to deal with clients on a personal basis, using bait-and-switch magazine ads to get people to walk into his office, and then suggesting "this one special house", smiling pleasantly and looking good and comfortable in his business suit and tie. This pattern is not going to die easily, and I would suggest that the 7%/month agent churn may indicate the agents' frustration at the quality of customers they get online. I am going to skip that one hidden gem for now. Maybe if the housing bubble bursts, the agents will get really desperate and will be paying for whatever advertizing channel they can get. Until then, I don't want to bet on 30% growth assumptions.
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