Boston Condos for Sale and Apartments for Rent

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Should you buy or sell Compass real estate stock?

Compass’ steady stock slide since the residential brokerage went public 17 months ago has put a question to investors: Is it time to buy or sell Compass stock?

The answer by some of the best investors on Wall Street is murky at best, some say buy and others say sell.

Wall Street Institutional buyers, those managing 401K’s to hedge fund managers are all over the map on this question. Some are cutting bait and getting out, Others are on a hold pattern, and still others are buying on the dip. Let’s explore these options, and see who’s doing what.

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Who’s buying Compass stock?

Two of the largest institutional buyers on Wall Street are on a buying spree since Compass recent decline.

One is Black Rock arguably one of the largest on Wall Street investors has amassed over 3% of all issued Compass stock. The other is Vanguard, who has accumulated $106 million in Compass stock in just the last 6 months.

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Boston condos

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Who’s selling Compass stock?

Discovery Capital Management is a notable seller, both given the volume of stock it has offloaded and its evangelism of Compass prior to its IPO.

The hedge fund, an early Compass investor which owned nearly 10 percent of Compass stock pre-IPO, executed a selling spree over the last six months. Its current holdings are valued at $19 million, down from approximately $240 million, according to PitchBook.

Since the start of this year, Wishbone Management and Wellington Management have sold 32 and 40 percent of their holdings respectively.

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Boston condos for sale

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Who’s Compass largest shareholder?

Compass’ largest shareholder continues to be SoftBank, the Japanese investment giant that co-led the firm’s Series F and G rounds. SoftBank recently disclosed that as of Aug. 5, its stake in Compass was down $540 million, and its losses have widened since then as the stock has fallen further.

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Boston condos

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What’s Compass stock worth today?

Compass stock is at $3.32 as of September 12, 2022 and is down 65 percent this year alone.

Some believe Compass’ share price declines are a reflection of investors’ changing perceptions about the company.

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Is Compass a tech company or a traditional real estate brokerage firm?

Valued as a tech company from its inception, Compass has over time become valued more as a traditional real estate brokerage company like Coldwell Banker, than a tech company.

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My thoughts

Asking whether Compass is a technology company or a brokerage is like arguing what color a house is while it’s on fire.

Is Compass making money?

Compass’ is losing money on a big scale. Compass has lost – more than $800 million between January 2021 and June 2022.

My thoughts

In all fairness to Compass, all the big real estate companies are losing money. The main culprit, nationally the housing for sale market is in a transition from a sellers market to a buyers market. But with that said, $800 million is a big loss in 17 months.

I would be very cautious in buying this stock. I understand the ebb and flow of the real estate market, and that’s not my concern. My biggest concern is Compass is comprised of independent real estate offices and agents that are on two year contracts, the word on the street is that many are not going to renew their contracts once they expire, because their not happy in the direction Compass is going in.

The bottom line, Compass is a traditional real estate company who generates all its value on selling real estate. If the best of their agents are bailing out, where does that leave Compass?

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