Move, Inc.

• The Bottom Line: Move, Inc. is the company behind the major real estate portal Realtor.com, acting as a digital matchmaker between agents and consumers, but as a value investor, you can only own a piece of it by investing in its parent company, News Corp.
• Key Takeaways:
  • What it is: Move, Inc. is a digital real estate company that operates Realtor.com, one of the largest property listing websites in the United States.
  • Why it matters: It's a significant player in the multi-billion dollar online real estate advertising industry, but it operates in the long shadow of its primary competitor, zillow, and can only be analyzed as a piece of its parent, news_corp.
  • How to use it: A value investor must analyze Move, Inc. not as a standalone business, but as a potentially undervalued asset within the larger News Corp conglomerate, using a sum_of_the_parts_valuation to determine if a margin_of_safety exists.

Imagine the American housing market as a gigantic, bustling fair with millions of homes for sale and millions of potential buyers wandering around. In this chaotic fair, real estate agents are the professional guides. Now, where do these buyers and guides connect? Increasingly, they meet in a massive digital pavilion. Move, Inc. is the operator of one of the largest and oldest of these pavilions: Realtor.com. Think of Move, Inc. as a sophisticated digital matchmaker. It doesn't build houses, sell houses, or employ real estate agents. Instead, its core business is to create a vibrant online marketplace that attracts millions of potential homebuyers with a vast inventory of listings. Then, it turns to real estate agents and says, “Look at this massive crowd of interested buyers. For a fee, we can make sure they see your face, your listings, and your contact information first.” This is the heart of its business model. Move, Inc. makes money primarily by selling advertising and lead-generation products to real estate professionals. Agents pay for premier placement, branding opportunities, and software tools that help them manage the digital leads (potential clients) that come from the website. It's crucial to understand one thing from the outset: you cannot buy shares of Move, Inc. directly on the stock market. It is a wholly-owned subsidiary of News Corp (Ticker: NWSA), the media empire controlled by the Murdoch family. This is a critical detail for any investor. Investing in Move, Inc. is, by definition, investing in News Corp and all its other assets, from the Wall Street Journal and Dow Jones Newswires to HarperCollins book publishing.

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.” - Warren Buffett

This quote is the perfect lens through which to view Move, Inc. Its success hinges entirely on its ability to build and defend a competitive advantage in the incredibly fierce digital real estate landscape.

For a value investor, a company like Move, Inc. is fascinating not just for what it is, but for where it is. Tucked inside a large, diversified media conglomerate, it presents a classic “hidden asset” scenario. Here’s why it should be on a value investor's radar:

• The Hunt for Hidden Value: Often, the stock market values a conglomerate based on its largest or most well-known business (in News Corp's case, traditional news media), while underappreciating smaller, higher-growth divisions. This can create a conglomerate_discount, where the sum of the individual parts is worth more than the company's total market capitalization. A value investor's job is to see if Move, Inc.'s growth potential is being overlooked, offering a chance to buy the entire News Corp “bundle” for less than its intrinsic_value.
• A Study in Economic Moats: The online portal business is a textbook example of a business built on a network_effect. The more listings a site has, the more buyers it attracts. The more buyers it attracts, the more valuable it becomes for agents, who then pay to advertise and ensure all their listings are on the site. This creates a virtuous cycle. The key question for a value investor is: How strong and durable is Move's moat compared to the fortress built by its rival, Zillow? Analyzing this competitive dynamic is a core exercise in value investing.
• Cyclical Business, Long-Term View: The real estate market is notoriously cyclical, rising and falling with interest rates and economic health. A short-term trader might panic during a housing downturn. A value investor, however, sees this cyclicality as an opportunity. If you believe in the long-term secular shift of real estate advertising from print to digital, a market downturn could be the perfect time to acquire a great business at a fair price, provided you have the patience to wait for the cycle to turn.
• Capital Allocation Case Study: As a subsidiary, Move, Inc.'s fate is tied to the decisions made at News Corp's headquarters. Are the profits (cash flow) generated by Move being reinvested wisely back into the business to fight Zillow? Or are they being siphoned off to prop up a declining newspaper division? For a value investor, understanding how a parent company allocates capital is just as important as analyzing the subsidiary's operations.

Since you can't analyze Move, Inc. in isolation, your task is to become a detective, piecing together clues from its parent company's financial reports.

Here is a step-by-step process a value investor would follow: 1. Start with the Parent: Download the latest annual report (Form 10-K) for News Corp (NWSA) from the SEC's EDGAR database or the company's investor relations website. This is your primary source document. 2. Find the “Digital Real Estate Services” Segment: Companies like News Corp are required to break down their revenue and earnings by business segment. Buried in the 10-K, you will find a section detailing the performance of the “Digital Real Estate Services” segment. This is primarily Move, Inc. ¹⁾. 3. Analyze the Segment's Vital Signs: For the Digital Real Estate Services segment, you need to track these key metrics over the past 5-10 years:

• Revenues: Is the business growing, and how fast? How does its growth rate compare to zillow's?
• Profitability: The company will report a profit metric, often Segment EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Is it profitable? Are its profit margins expanding or contracting?
• Key Performance Indicators (KPIs): Read the “Management's Discussion and Analysis” (MD&A) section of the 10-K. Management will often discuss metrics like average monthly unique users for Realtor.com. This tells you if they are winning the war for consumer attention.

4. Perform a Sum-of-the-Parts (SOTP) Valuation: This is the most critical step. A SOTP analysis is the process of valuing each of a company's divisions as if they were standalone businesses and then adding them together.

• Step A: Value the Dow Jones / News Media segment. You might use a multiple of its earnings or cash flow, perhaps comparing it to a company like The New York Times.
• Step B: Value the Book Publishing segment (HarperCollins). You could compare it to other publicly traded publishers.
• Step C: Value the Digital Real Estate Services segment. This is the tricky part. You would look at the valuation multiple the market assigns to its closest competitor, Zillow (e.g., Enterprise Value to EBITDA). Since Move, Inc. is the #2 player, you would likely apply a discount to Zillow's multiple to be conservative. For example, if Zillow trades at 15x EBITDA, you might value Move, Inc. at 10x-12x its segment EBITDA.
• Step D: Add the values from A, B, and C together. Then, subtract News Corp's corporate debt to arrive at a total equity value.
• Step E: Compare your calculated SOTP value to News Corp's current market capitalization. If your SOTP value is significantly higher, you may have found an investment with a substantial margin_of_safety.

A SOTP analysis doesn't give you a single “correct” number; it gives you a framework for thinking about value.

• If your SOTP value is far above the market price: This suggests the market is pessimistic and lumping all of News Corp's assets together as “old media,” failing to appreciate the value of its high-quality digital real estate asset. This is a classic value investing thesis.
• If your SOTP value is close to or below the market price: This indicates that the market may be fairly valuing the company, or that the growth prospects for Move, Inc. are not strong enough to offset the challenges in News Corp's other divisions. In this case, no clear margin of safety exists.

The key is to be conservative in your assumptions. Use reasonable multiples and always ask yourself what could go wrong.

Let's simplify this with a hypothetical example. Meet Analyst Anna, a diligent value investor. She's analyzing “Global Publishing Co.” (GPC), a conglomerate that the market sees as a boring newspaper company. GPC's total market capitalization is $10 billion. Anna suspects the market is missing a hidden gem: GPC's fast-growing online mapping division, “MapQuest 2.0”. She performs a SOTP analysis: 1. Newspaper Division: It generates $500 million in annual cash flow. It's a stable but no-growth business. Anna values it at 6 times cash flow, a typical multiple for this industry. Value = $3 billion. 2. Book Division: It generates $300 million in cash flow. A slightly better business. She values it at 8 times cash flow. Value = $2.4 billion. 3. MapQuest 2.0 Division: This is the growth engine. It generates $400 million in EBITDA and is growing at 15% per year. Its main competitor, “Waze Inc.”, trades at 20 times EBITDA. Being conservative, Anna values MapQuest 2.0 at a discounted 15 times EBITDA. Value = $6 billion. Anna's SOTP Calculation:

Conclusion: Anna's conservative estimate of GPC's intrinsic value is $11 billion. The market is currently selling it for $10 billion. This represents a potential, albeit small, margin of safety. Her decision to invest would depend on how confident she is in the future of the MapQuest 2.0 division and whether she believes the 10% discount is sufficient protection. This is precisely the thought process required to analyze Move, Inc. within News Corp.

Investing is a game of weighing probabilities. Here’s a balanced look at the arguments for and against investing in Move, Inc. via News Corp.

• Hidden Asset Value: The primary bull argument is that the market is applying a slow-growth “media company” multiple to News Corp, thereby significantly undervaluing the high-quality, high-growth digital asset that is Move, Inc. A spinoff or a change in market perception could unlock this value.
• Brand Authority and NAR Partnership: Realtor.com has a unique and exclusive partnership with the National Association of Realtors (NAR). This lends the brand an air of officiality and credibility that competitors cannot replicate, and it provides a direct, reliable feed of listing data.
• Rational Competitor in a Duopoly: For years, the market has largely been a duopoly between Zillow and Realtor.com. In such markets, the two dominant players can often compete rationally, leading to healthy profit margins for both over the long term.

• Perpetual Number Two: Move, Inc. has consistently been the number two player behind Zillow. Zillow's brand recognition and network_effect are immensely powerful. In internet businesses, the winner often takes most of the market, leaving the #2 player with permanently lower market share and profitability.
• Intensifying Competition: The competitive landscape has become more aggressive. CoStar Group, through its Homes.com portal, has entered the market with a massive advertising budget, threatening to turn a profitable duopoly into a costly three-way war for market share. This could severely compress profit margins for years.
• The “Conglomerate Curse”: Being part of News Corp can be a weakness. Move, Inc.'s strategic decisions and capital are ultimately controlled by the parent company. There's always a risk that cash flow from Move will be used to fund other, less promising ventures within the empire, starving the real estate business of the investment it needs to compete effectively.
• Housing Market Sensitivity: The company's revenues are directly tied to the health of the U.S. housing market. A prolonged period of high interest rates or a recession would significantly impact agent advertising budgets and, therefore, Move's bottom line.

• news_corp
• zillow
• sum_of_the_parts_valuation
• economic_moat
• network_effect
• conglomerate_discount
• capital_allocation