It’s no secret the housing market has been hot the last couple of months. One would think that a stock like Zillow ($Z) would be following suit. But the stock market doesn’t always act like we think it should.
We’re not here to tell you why Zillow’s stock is behaving this way. Things always seem obvious with the benefit of hindsight.
We’re not here to tell you what this stock is going to do next. Trying to predict how the investing masses will value a single stock in the future is a not a game we play.
What we are here to tell you is that THE STOCK MARKET DOESN’T HAVE TO MAKE SENSE. The stock market, or a single stock within that market, doesn’t care about fitting a clean, concise narrative.
The sooner investors understand this, the better off they’ll be.
**None of the information in this video should be taken as a recommendation to buy or sell any securities mentioned**
The Stock Market Doesn’t Have to Make Sense: Zillow Edition – Full Transcript
**For a downloadable PDF version of this transcript, click here!**
In episode 258, we’re going to talk about how the market doesn’t always have to make sense. Welcome to the Mullooly Asset Show. I’m your host, Casey Mullooly. Thanks for tuning in. So everyone that I know, my friends, my parents, my parents’ friends, everyone seems to be talking about buying homes.
Me and my friends joke now when we’re looking at a house together on Zillow, “Does that mean we’re old now?” And yeah, maybe it does, but everyone seems to be paying attention to their neighborhood’s housing markets. They’re listening in for how much. They’re asking, “What? They got 52 offers in a week? That house sold in four days?” It seems to be crazy.
The housing market is just bonkers right now and has been for a couple months now. We’re recording this in early August of 2021, and where is everyone going to do this housing market research? Zillow. Everyone’s going online to Zillow and checking out what the houses are listed for in their neighborhoods, the different history. Zillow has it all on there.
I’m sure you’ve been on there and are familiar with their website as well. So what do we think that its stock has been doing lately? Rhetorical question because I have the answer. Zillow’s stock as of August 3rd is down 48% from its all time highs that it set earlier in this year, around early March, late February. Yeah, quite the head-scratcher.
I don’t really know whether to make heads or tails of it. We’re getting this from Ben Carlson, who asked the question to his Twitter followers, “Someone who’s better at stocks explain to me why Zillow is price got cut in half during one of the greatest housing booms of this generation.”
And some of the replies were, “Oh, it ran too far, too fast. All of this housing boom information was priced in back earlier in this year when the stock was running up.” And the stock has done very well over the last year or so. It’s still up, I think, around 60%.
So it’s still done very well, but you would think that with everyone going online and with the housing market the way it is that it would just continue to skyrocket. But the market doesn’t always make sense.
The market does not move in clear, concise narratives like we think it should or that we think it does. And that’s the risk that you take when you invest, especially in individual companies like Zillow. The market doesn’t always move in clear paths and it’s frustrating and it doesn’t make a lot of sense, but that’s just the way it is and that’s just something that we have to live with. So be careful drawing straight lines.
Just because something is hot doesn’t always necessarily mean that that’s going to translate to its stock price. That is a recipe for disaster. And that’s the message for episode 258: the stock market doesn’t always make sense. See you in the next one.