Tuesday, December 23, 2014

A Rant about (TREE)

I'll keep this short because the story is simple. There is a great write up on Seeking Alpha by New Capital: The Beauty of Shorting I will just highlight a few observations here.

  • This website asks you a bunch of questions then sell your contact information to strangers.
  • The company has been in business for 18 years and still can't make any money.
  • Management makes absurd claims that their brand is more recognizable than Citibank.

I tried for this research and now I'm flooded with calls from strangers. I've given away my phone number, and there's still no rate quotes - just brokers calling me. Who in the world wants this??

And yes they had the galls to ask for your social security number - again before showing any rate quotes. Who in their right mind does this??

TREE trades at 42x PE, 3x sales. Revenue is growing at a modest ~10% pace, but that is fueled by marketing and advertising spends. There are no operating leverage in this business, so no amount of sales will translate to EBITDA or earnings growth. The company has proven this in its history.

I've looked at other "lead-gen" companies. Most of them trade at sky-high prices but few are as bad as TREE. TrueCar is as least innovative and disruptive, if somewhat easy to copy. Zillow/Trulia both have name recognition and together could be considered a monopoly. is easy to use and actually have contents. TREE is none of these.

The only sensible thing to do is short the fuck out of this. Unfortunately it's a bull market out there so you have to pick your spots. Check out the LendingTree website, do your research, and short on signs of weakness.


Here's TREE asking for your social security number:

LendingTree wants your social security number

Here they try to sell me a real estate agent – despite having indicated that I’m not interested in one earlier:

LendingTree wants to sell you real estate agents

And of course, LendingTree is more famous than Citibank:

LendingTree more famous than Citibank

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