🔒 WORLDVIEW: Top money manager tips this disruptive potential Amazon of real estate

The earlier the better when it comes to discovering companies that apply technology to disrupt their industries. And thanks to my colleague Jackie Cameron, we should all be having a closer look at this potential Amazon of the home real estate industry, a London listed company called Purplebricks.

Jackie applied a tested approach financial journalists: where you are personally impressed with your experience, check to see if the smart money has spotted its potential. When the two come together – Bingo. Because among UK money managers, few are more highly rated than Neil Woodford, and he’s a big Purplebricks fan.

Jackie writes: “With commissions of up to 7%, South African estate agents are regarded by many as notoriously overpaid. In the UK, estate agent commissions are much lower – ranging from around 1.5% to 4%.
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But, where South African estate agents earn their keep by showing potential buyers around a property, in the UK you struggle for more than a brochure, a website listing and faceless agents fielding calls. It’s quite normal in the UK for the home owners to do the actual showing. And when a deal is ready to be done, lawyers take over.

With this do-it-yourself approach to marketing homes, it is logical that UK sellers have shifted rather easily to online estate agencies which charge less for helping to draw potential buyers.

One UK digital residential estate agency that has become increasingly visible over the past 18 months is Purplebricks. After mushrooming in England, it has been painting towns here in Scotland purple with its distinctive billboards as more sellers cut out high street estate agencies. It has been advertising aggressively on TV, too.

The Purplebricks model is compelling. It puts up great pictures of your home on an easy-to-navigate website. A booking template for viewings feeds directly into slots pre-allocated for house-hunters by the sellers.

I bought my home through Purplebricks last year. As the online diary filled up quickly, the property was taken off the market after the first week and went to a closed competitive auction – such is the success of the Purplebricks approach. The next time I sell property, I intend to join the herd I see around me who are saving on unnecessary agency commissions.

Purplebricks has also caught the attention of Neil Woodford, a highly rated UK fund manager known for getting in early on investment opportunities. He revealed that Purplebricks is among his hottest stocks when he released the Woodford Patient Capital Trust’s 2017 interim results earlier this month.

The trust, which includes early stage companies along with Woodford’s high conviction ideas, has £830m in assets under management and is one of Woodford’s newer funds. Woodford, appointed a Commander of the Order of the British Empire (CBE) in 2013 for services to the economy, is regarded as one of the UK’s most talented investment managers.

Some analysts have cautioned that the rapid rise of the Purplebricks share price is ‘’bonkers” and unsustainable. But even before it listed in 2015, Woodford has been excited about disruptor Purplebricks’s long-term potential. His reasons include that it is replicating its business model in other territories, having launched in Australia last year and earlier this year announcing plans to establish a US presence.

“In the period under review, shares in Purplebricks more than trebled in price, reflecting the success that the business is demonstrating in the UK and, increasingly, overseas. I am also confident there is more significant growth to come for the business in the years ahead,” he enthuses in his report.  With ‘for sale’ signs changing colour to purple everywhere I look, Woodford could easily be right.

You can invest in AIM-listed Purplebricks directly (LSE: PURP; market cap £1.6bn; 430p/share). Or you can opt for a fund like Woodford’s investment trust that includes it in a diversified basket of shares. Old Mutual GI and Artemis fund managers have also snapped up Purplebricks, according to its shareholder register.”

Nice one Jackie. During an era of seismic change, as the world is experiencing right now, it pays to look for those businesses that have the potential to deliver exponential growth. The mushrooming Purplebricks looks to fit that bill. Looks like the kind of stocks worth putting into the bottom drawer – just like other disrupters Amazon, Alphabet, Tesla, Facebook and Netflix.