Surprise: My Favorite Real Estate Stock Isn't A REIT, It's CoStar Group

8/6/20

CoStar Group (CSGP) put together a solid quarter in a real estate environment that has not been this beaten down since the Great Recession. Shares of CSGP provide a creative and attractive countercyclical addition to any REIT portfolio. Costar's sustainable subscription revenue model and a sizable war chest for acquisitions continue to make it one of our top ranked positions.

Last October, I highlighted the sustainability of CoStar’s subscription revenue model, the shares of which have risen over 41% since, while the S&P 500 has returned almost 14%. Our original investment thesis remains in place, with the risk-return trade-off improving markedly since October of 2019. The non-correlation to a large portion of the REIT market make it a fit for both growth and real estate investors.

In a time of market turmoil, Costar remains a buyer. The most recent acquisition occurred virtually, with the purchase of Ten-X's commercial real estate division. The acquisition increases CSGP's footprint in the distressed commercial real estate market, an area very likely to rise as the COVID-19 pandemic continues on. Costar's purchase of Ten-X increases the non-cyclical nature of their business.

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