Ed Note: This article was previously published on the writer’s own website.
Redfin (RDFN) is a Serenity level holding in the Freedom Portfolio, and it holds a special place in my heart. About a year and a half ago I decided I wanted to get more serious about investing and to start really digging into companies, reading their earnings reports, listening to the earnings calls, and reading up on what other analysts were looking at. Redfin (named for “Real Estate Redefined”) was the first company that I decided to try it with and so even though it’s only a Serenity level holding, I still find myself rooting for it harder than I do for some of my larger positions.
I believe that one of the keys to successful investing is controlling your emotions and I definitely acknowledge that having such a strong emotional attachment to a holding (like I do with Redfin) is dangerous. However, I also realize that sometimes you just can’t control how you feel, and in those cases being aware of your emotions and how they could possibly bias you can be just as important. I can’t help but be at least a little emotionally invested in Redfin and wanting it to succeed. At the same time, I can acknowledge that my judgement could be affected, which is why having it be a Serenity level holding seems like the right size for now.
I first stumbled upon Redfin while house shopping in 2012. While I really liked the townhouse that my family was living in, it was something that I had bought before marrying my wife, and she wanted some place that felt more like “our” house (as opposed to her moving into “my” place). We also felt that, with a growing family, we would want a larger house with a bigger backyard in the near future, so we started looking at a single family home to buy.
Early in the process I tried a number of different websites. I used Zillow and Realtor.com and a few others before finding Redfin. Once I discovered Redfin, though, it pretty much became the primary site that I used to search for house listings. Every part of the experience just seemed flat out better than its competitors. Their listings always seemed the most up-to-date and always seemed to have the most information (pictures, school rankings, price history, lot size, interior features, etc). I also found their app to be the most useful of all the ones I had tried. We were already using a friend as our realtor, so I didn’t even consider using a Redfin realtor, but I still found the site to be immensely helpful for keeping tabs on houses that we were looking at and being alerted to price drops or houses being taken off the market.
Fast forward to 2017. No longer being in the market for a house, Redfin had completely slipped from my mind until I heard about their IPO. As I mentioned before, around that same time I was getting more serious about investing and was looking for a good company to dig into. Redfin seemed like the perfect choice. It was a company whose product I enjoyed and with which I was already somewhat familiar with. Also, since it was a new IPO with a relatively small market cap, it felt like an under-covered company as well.
I really liked what I saw, and ended up starting a small position in early 2018. It was a position that I would add to two more times throughout the year.
It’s worth a little time explaining what makes Redfin different from their competitors. Redfin claims to have “invented map-based real estate search in the US” and was established before the introduction of Google Maps. Unlike their major competitors (Zillow, Trulia, Realtor.com) whose business models largely revolve around advertising, Redfin operates a brokerage and has their own real estate agents and therefore makes money when users buy and sell home with them.
This may seem like a minor difference, but it can have important implications. Companies like Zillo