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Author: pitbullgems Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120  
Subject: My 2 Cents Date: 2/1/2007 8:40 PM
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Time really flies...I was surprised to see that a year + has passed since this stock was recommended. I guess it's easy to say now, but I never liked this stock and I thought Tom's analysis was off. Let me follow that up by saying, most of my stock picks come from Tom's ideas. I attribute the growth of my portfolio, my investing style and my eagerness to learn about the market to his monthly writings.

First off, Housevalues didn't make sense to me because the lead generation business is/was packed with options for realtors and mortgage brokers. Tom cited Google and Yahoo as potential threats. In reality, we loans officers have had numerous options when it comes to purchasing leads online. It is a highly competitive market with discounters at every turn. Another problem is internet leads are considered mildly warm leads. If telemarketing starts off as a cold lead, a personal referral is a warm lead and someone calling your office is a hot lead, interent leads fall somewhere between cold and warm. Internet leads rank this low for a couple of reasons:
1. people fill out info on pop-ups while they are surfing the net and they are not really seriously in the market to refi...many don't even respond to the lender's follow up calls and emails
2. people on the net who are serious tend to be serious shoppers... thus, they really grind on rates and fees making the close that much tougher
3. some thought they were just getting a free value report on their home and are reluctant to open dialogue about refinancing
4. there are better ways to generate hotter leads that cost less

For these reasons, most loan officers I have worked with and managed tried internet leads for a limited time. They gave up quickly when the return on their investment didn't materialize. Housevalues' primary revenue stream is their lead generation program. This was the first and biggest red flag to me.

Next came the strong growth of the 6 year old company. I ask you this question, 'Who in the industry didn't grow by leaps and bounds during the real estate boom?' Rates reached such low levels that anyone could make money in the refinance market. You didn't need experience or connections. Everywhere you looked, someone could benefit by lowering their rate. During this time, it made sense to hire telemarketers and purchase leads online. But as rates increased and the market slowed things really changed. The 'Do Not Call' list was introduced and telemarketing became a bad word. Internet leads suffered too. Most people looking to refi in the last 18-24 months already refinanced and had a low rate.(The mortgage broker industry has sinced moved to generating business via mailers, their own web site and the old fashioned method networking. Some are having success with radio advertising as well.) Housevalues growth came during what was probably the industry's greatest growth period in it's history.

Lastly, the real estate market is contracting. Companies, broker and lenders alike, are going out of business every day. There are fewer and fewer loan officers and realtors because there are fewer and fewer customers. Don't get me wrong, the real estate industry is not going away. It just isn't going to be able to support the masses like it has over the past 6-7 years. Because of this, companies who generate leads will have it tougher and tougher.

Perhaps Housevalues' stock price has reached such low levels that it is now worth buying. That's up to you. For me, I'd rather wait for something to come along that has big growth potential well into the future.

I'm not a numbers and ratio investor at all. Honestly, most of that stuff is like a foreign language to me. I look for businesses that I understand and I look for competent honest people(like the Motley Fool) to dissect the companies in a way that I can understand and I proceed from there. If you read this far, thanks for your time...it's been a slow day at the office! Happy Investing
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