Core Thesis - Compass, Inc. is positioned as a leading tech-enabled real estate services company in the U.S. with a recent acquisition of Anywhere, enhancing its market presence and operational capabilities [2][4]. Company Overview - Compass, Inc. operates as the largest brokerage in the U.S., offering a technology-driven platform complemented by services such as title, escrow, and mortgage [2]. - The company will have approximately 340,000 agents globally, capturing around 18% market share and generating approximately $12.7 billion in revenue with $816 million EBITDA, including synergies from the Anywhere acquisition [3]. Investment Case - The investment thesis is built on three main pillars: thematic exposure to the housing market, platform advantages, and strategic synergies from the Anywhere acquisition [4]. - The housing market is expected to rebound from historical lows in existing home sales, driven by structural demand despite high mortgage rates [4]. - Compass's disciplined cost management and scale advantage justify a premium valuation compared to peers [4]. Synergies and Financial Outlook - The Anywhere acquisition is projected to create cost efficiencies and revenue synergies estimated at $225 million, with manageable pro forma leverage expected to decline towards 1.5x EBITDA as free cash flow is used to reduce debt [4]. - The combination of cyclical tailwinds, long-term platform leadership, and immediate deal synergies presents significant upside potential with limited downside risk [5]. Key Catalysts - Important catalysts for value realization include quarterly earnings reports, updates on the integration of Anywhere, developments in the housing market, and potential policy changes affecting mortgage rates [5].

Core Insights - RH, formerly known as Restoration Hardware, has faced significant fluctuations in its business and stock performance over the years, particularly influenced by macroeconomic factors [1][2]. Company Strategy and Performance - CEO Gary Freeman initially proposed ambitious expansion plans to transform RH into a comprehensive lifestyle brand, including ventures into restaurants, hotels, and real estate developments [2]. - Despite the downturn in the housing market due to the Federal Reserve's rate hikes in 2022, RH continued to expand its core luxury homegoods business, accumulating debt in the process [3]. - The stock price peaked in August 2021 at around $700, driven by investor enthusiasm for the company's growth potential [2]. Economic Environment - A year ago, there was optimism for a recovery in the housing market as the Fed began cutting interest rates, but this was short-lived due to subsequent market reactions and tariff policies from the Trump administration that negatively impacted manufacturing operations in Southeast Asia [4].

Group 1 - Shares of Toll Brothers (TOL) have underperformed over the past year, losing approximately 13% of their value [1] - Expectations for a recovery in the housing market diminished at the beginning of 2025 [1] - The analysis is based on over fifteen years of experience in making contrarian bets and identifying stock-specific turnaround stories [1]

Core Insights - The National Association of Realtors (NAR) predicts a significant rebound in the housing market for 2026, with a forecasted 14% increase in nationwide home sales and a 5% increase in new-home sales [2] - Home prices are expected to rise by 4% due to job growth and supply shortages [2] Group 1: Market Predictions - NAR Chief Economist Lawrence Yun anticipates a measurable increase in sales in 2026, driven by positive market conditions [2] - Early signs of market activity include an increase in mortgage applications and a decrease in mortgage rates [3][4] Group 2: Mortgage Trends - Mortgage applications have remained consistently above last year, indicating a strong desire among consumers to enter the market [4] - The 30-year fixed-rate mortgage rate has decreased from 7% in January to 6.24%, with expectations of averaging around 6% next year, improving affordability [5] Group 3: Market Disparities - The housing market rebound is expected to vary across different segments, with the upper end of the market performing better than the lower end [6] - There is a disparity between buyers with existing home equity and those attempting to enter the market [7]

Core Viewpoint - The article highlights compelling investment opportunities in consumer discretionary stocks, particularly in retail, despite a tech-driven bull market overshadowing them [1] Group 1: Lululemon Athletica - Lululemon Athletica's shares have declined significantly this year due to weakening sales trends, but this does not reflect poorly on the brand itself [3][6] - The stock trades at a forward price-to-earnings multiple of 13, indicating potential value for investors, especially as Lululemon has been growing faster than Nike [3] - Lululemon has a market capitalization of $21 billion, operates 784 stores globally, and has tripled its sales over the last six years [5] - The company has a strong customer base with 30 million members in its program, and international sales, particularly in China, are expected to grow by 20% to 25% next quarter [5][6] Group 2: RH (Restoration Hardware) - RH is positioned to benefit from a potential rebound in the housing market as the Federal Reserve lowers interest rates, making it a strategic investment for 2026 [7] - The company caters to higher-income clients and has expanded into lifestyle branding, including hospitality and luxury services [8] - RH has a market capitalization of $3 billion and reported an 8.4% year-over-year revenue growth in the second quarter, with a 21% increase in demand on a two-year basis [10] - The company has successfully expanded into less populated areas, with a remote gallery in England driving a 76% increase in demand [11] - The stock is trading at a forward P/E of 20 and is down 75% from its previous peak, suggesting it may be undervalued relative to future growth opportunities [12]

Group 1 - The article highlights that investors are closely monitoring Lennar's earnings and commentary for indications of a potential rebound in the housing market [1]

Business Outlook - Persimmon is on track to sell more homes this year [1] - Persimmon expects to sell more homes in 2026 [1] Market Trend - Optimism is building around a UK housing rebound [1]

Market Sentiment and Positioning - Home builder stocks are known for rapid movements, requiring investors to be early to avoid significantly higher prices [2][3] - The recent surge is attributed to sentiment and fundamentals slowing their decline, rather than actual fundamental improvement [3] - Specialists were tactically positioned negatively, but a slight improvement in the environment led to a realization of undervaluation and potential for dramatic revaluation [6] Valuation and Fundamentals - Home builders are structurally undervalued, historically trading on book value, which is no longer appropriate [4] - Companies have improved fundamentals by becoming more land light, increasing sustainable profitability, and reducing leverage [4][5] - NVR, a builder in the space, trades at a PE multiple of 18 or higher, while many others recently traded at high single-digit PE multiples [7] Policy Impact - Removing capital gains taxes on home sales would incrementally help the higher end of the market due to existing tax shields of $250,000 for singles and $500,000 for married couples [10] - A return of consumer confidence, particularly among lower-end consumers, would be the biggest catalyst for a rebound in housing demand [11][12][13] - The current administration's actions have created instability and uncertainty, potentially hurting the housing market more than helping it [11]