Investors who were loyal to real estate brokerage, technology and mortgage-related stocks in 2006 both won and lost on Wall Street.
Interactive Corp., Countrywide Financial and Fannie Mae trounced the market indices and contributed to a positive return for the hypothetical Inman Index of 10 stocks while HouseValues and ZipRealty ended the year in negative territory. Freddie Mac, Move Inc. and Washington Mutual were gainers, but lagged behind the indices, as did the Inman Index as a whole. (Realogy replaced Cendant Corp. in the Inman Index in August; neither company is included in the annual computations.)
Interactive Corp. started the year at $28.29, touched lows near $23 last summer, rode upward to a $38.46 peak in mid-December and closed the year at $37.16. Investors who stayed the course captured a 31 percent gain.
Countrywide opened Jan. 3, 2006, at $34.35, fell to a low of $32.10 in early February, peaked near $43 in mid-May, dropped again to $32.24 in late August and then closed Dec. 29, 2006, at $42.45. Those who hung on enjoyed a 23 percent gain for the year.
Fannie Mae jumped in January from $49.50 to $58.60, trended downward to a low of $46.70 at the end of July, climbed above $62 in November, dipped sharply and then settled just shy of $60 at year-end. Loyal investors earned a return of 20 percent.
All three stocks tracked 2006 housing market trends and interest rates to varying degrees. Reports of slowing home sales and softening home prices surfaced in the summertime after the Federal Reserve hiked short-term bank interest rates four times in the first half of the year.
HouseValues, an online lead generation company, turned in a strong stock-market performance in January, but then plummeted in March, trended lower throughout the summer after a modest May rebound, and then failed to gain much traction before year-end. Those who stuck with the company for the entire year lost 56 percent of their investment, despite an attractive 5.4 percent gain in December.
Countrywide was also a strong performer in December with a one-month gain of 7 percent. The company reported November mortgage loan fundings of $38 billion, an 11 percent decline from the prior-year period, according to news reports.
An analyst at Stifel Nicolaus & Co. downgraded his recommendation on the mortgage banking company from “buy” to “hold,” according to a BusinessWeek.com report. “While we continue to believe CFC is a long-term winner in the sector, the risk/reward has become increasingly unfavorable,” the analyst wrote. An analyst at Keefe, Bruyette & Woods also downgraded Countrywide in December from “market perform” to “under-perform” with a target price of $36.
Fannie Mae filed its amended 2004 financial results with the Securities and Exchange Commission in December, but has yet to turn in its 2005 or 2006 reports. An analyst at Morningstar, which, according to BusinessWeek.com, has suspended ratings on Fannie Mae until the financial reporting is up to date, may have summarized Wall Street’s take on the situation: “Although we have only begun sorting through all the numbers to assess Fannie’s true performance in prior years, we remain convinced that there is a solid business behind all of this accounting mess,” he wrote.
The biggest gainer in December was Realogy, which announced an agreement with Apollo Management to take the company private in a buy-out deal worth $6.6 billion. Apollo was a major investor nearly 10 years ago when Realogy, formerly a division of Cendant Corp., founded NRT, which owns real estate brokerage companies.
The Apollo buyout isn’t a done deal, and at least one portfolio manager has argued that the valuation is too low and should attract other bidders. “We would be disappointed in anything less than $36,” he wrote.
Marcie Geffner is a real estate reporter in Los Angeles.
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