Rightmove (RMV) is one of the decade’s top-returning stocks.

Investors have generated a +1,500% total return!

Studying the Super Stocks of the past helps us spot future Super Stocks today.

Here’s a thread on what made RMV a network effect monster https://macro-ops.com/super-stock-case-study-rightmove-plc-rmv/

2/ Biz Description & IPO

RMV is a property portal in the UK. They allow RE agents, homeowners & homebuilders to list their home for sale on their website (think Zillow).

Before IPO, RMV offered initial shares to its customers (RE agents and developers).

That’s confidence.

3/ Owning Their Market

In 2004 RMV was the largest property list site in the UK.

They commanded 79% market share in total pageviews.

24/25 top RE agents listed homes ONLY on RMV

25/25 top UK home dev. Listed on RMV

82% of UK homebuyers that bought on the internet used RMV

4/ The Power of Network Effects

It’s a classic network effect model:

- More home listings = more site visits
- More people encourage agents to list on RMV.
- Seeing the buying, home devs list on RMV.

This reinforces that network. Soon, an impenetrable ecosystem is born.

5/ Narrative To Numbers

RMV displayed EARLY & HIGH rev growth in its first 3 years:

- 98%
- 85%
- 69%

In total, they grew revs from 17.6M in ‘04 to 113M in ‘07 (540%!).

At the same time, they expanded operating margins from 27% to 53%.

By 2007, RMV traded for 21x EBIT.

6/ Early Sentiment

I’m always interested in early sentiment on a super stock.

Here’s a good summary of the RMV sentiment around its IPO:

- Expensive price
- Good brand name
- Popular biz

2 things analysts got wrong:

1. RMV wasn't expensive
2. Popular = network effects

7/ First Mover Advantage

RMV moved first during the UK’s Home Information Packs (HIPs) legislation.

They made an in-house HIP portal so customers could store HIP-mandated documents on the RMV website.

Second, RMV funded the HIP for customers until the house sold.

8/ HIP Ramifications

RMV’s moves on the HIP news set the standard for competitors. They established a “rule of law” for the RE listing industry.

It cost RMV $8.5M to make in-house HIP tech.

They could’ve outsourced, but it would’ve reduced customer experience.

9/ Rely on Core Business, Not Catalysts

The UK govt halted HIP program. RMV’s $8.5M investment was worthless.

The stock dropped 20% on the news and down 30% that week.

Yet the core biz was growing 60% w/ expanding operating margins.

Terminally, it's core biz that matters

10/ The Housing Crisis

08-09 was a bad time for housing.

Without looking at financials, you’d expect RMV to post lower revs, profits & margins.

That wasn’t the case. Revs shrunk 6% in ‘09 while op. margins expanded to 56%. How?

- 100% GM
- Scalable SG&A
- No debt & low D&A

11/ Share Price =/ Biz Value

Knowing the above, we’d expect a slight (if any) decrease in RMV’s stock price.

But what we got was a 75% peak-t0-trough drawdown from 07-09.

While the stock crashed, the biz grew rev $13M, OI $10M, and expanded margins 800bps

EfFiCiEnT mArKeTs?

12/ Potential Screens To Find RMV

Here’s a stock screener that would’ve picked up RMV during 2004-2005:

- Revenue Growth YoY: 25% or Greater
- Operating Margin: 20% or Greater
- Current Ratio: 1.5x or Greater
- Market Capitalization: $1B or Less

Get to hunting for RMVs!

13/ Reviewing The Thesis

Like most Super Stocks, the bull case rested on a few variables:

- Expand users & RE agents on the platform
- Incentivize home developers to list on the platform
- Maintain low SG&A expenses

Thesis was simple and biz model powerful. RMV was a monster!