Hello everybody, it's Sam from Financial Samurai. And in this episode, I want to talk about using data to conduct investment arbitrage to make money. Back in June 2019, I came up with this thing called the FS 20 indicator. It was a property leading indicator that gives buyers the confidence to buy real estate.

Now what is the FS 20 property indicator? Well FS stands for Financial Samurai, of course, and 20 stands for 20%. So the FS 20 property indicator goes off. It signals a buy when a home's final sales price is at least 20% higher than the online estimate in the neighborhood you want to buy.

So for example, if Redfin or Zillow says this house is worth a million dollars, right, that's their Zestimate or Redfin estimate, and it goes pending, and then three weeks later, it sells for 1.2 million or higher, as a potential buyer on the sidelines, you look at that result and think, "Hmm, that is some interesting stuff," because the online estimates were so off.

And when you have a final sales price that is 20% or greater than the estimate, that is signifying that the market is moving ahead. It's moving up. And therefore, if you can find comps in that neighborhood, where you can buy below that final sales price, or actually at the Zestimate or Redfin estimate, which is much lower, right, then you're probably good to go and you're probably going to get a good deal.

Now of course, not one sale does a trend make. So you as the potential buyer need to continuously, you know, tag all the homes that you like. Hopefully you go visit them all as well. And you keep a checklist to say, "Okay, what was the Zestimate or the Redfin estimate?

What did it finally sell for?" And you plot some trends. And so this is what I came up with in 2019. You can go check out the post yourself and it's linked in the podcast FS20 Property Indicator. And what has happened since then is that things have gone up, right?

It's been pretty spot on if you were following this trend, because real estate has done very well since 2019, especially in 2020 and 2021. Okay, so it's easy to say, "Yeah, things have done well." But again, you got to reverse back time, go back to 2019 and just think about how we were feeling.

You know, 2019, things were pretty good, but things were feeling pretty frothy as well. So don't do revisionist history and think, "Oh, well, I knew 2019 was the time to buy because look at prices now." Instead, got to look at the data. And at least here on Financial Samurai, all these posts are published with the dates and you can see the comments.

So there's really no going back. I can't hide from anything, even if I wanted to. So use these online estimates in your favor to try to get better deals. There's always a deal out there, especially in real estate. And there's always a deal out there, especially in the stock market too.

The markets are inefficient and things are changing all the time, which is why there's always opportunity. Now, just speaking of Redfin and Zillow, just heads up, as of October 21st, I noticed over the past 30 days that there's been a huge revaluation in their online estimates of real estate.

And we're talking, at least here in San Francisco, like a 10% plus increase. So they suddenly changed their estimates again so they don't look so far off. And I talked about this in the past regarding how you can use their poor estimates in your favor. So with regards to using data, data is your friend if you can use it appropriately.

And what I realized very recently is that there's other data that stock investors can use and real estate investors to make more informed investments. And that is the Yelp quarterly economic average report. They come out with these reports every three months, and they talk about what they're seeing in terms of small businesses, what's opening, what's closing, how does this year compare to this time last year, specific segments, and so forth.

Now recently my wife and I finally went out on a social gathering to see other preschool parents. It was like the first time in probably 18 months together seeing other people. We had some drinks outside, and it was really interesting. And while at this gathering, I realized I was a little bit self-conscious because I hadn't gotten a professional haircut in 18 months.

I've just been using my clippers, so I wore a hat. And then I realized, wow, everybody's dressed so nicely. Whereas I've been dressing in track pants and t-shirt and just like a jacket for actually forever. Well, since 2012, since I left finance. And so that also made me think, "Hmm, I should probably get some new clothes." And so I did decide to get new clothes, a couple of shirts and a sweater to upgrade my 10-year-old ratty t-shirts.

And they felt a little bit snug. And I thought, "Hmm, I better get back in shape or at least stay in shape so I can keep these clothes for a very long time." You know, what a shame to buy your favorite jeans and then you put on 20 pounds and you can't fit in them comfortably anymore.

Anyway, so all of this led to my thesis that, "Hey, maybe buying health and fitness stocks is a good idea." And you can check out the post for more details on why I like this one fitness company called Lifetime Fitness, Lifetime Group LTH. It's not investment advice, but just check out my rationale because I used to think about this and write these kinds of reports while I worked in finance for 13 years.

So going back to using data to make investment arbitrage decisions or better investment decisions, while I took a look at the Q3 2021 Economic Average Report, and in the report, it said, "After a year of home and outdoor workouts growing in popularity, gym and fitness classes are back on the rise." In Q3 2021, Pilates is up 54%, pole dancing classes up 56%, aerial fitness, that sounds really fun, up 74%, yoga 41%, bar classes 42%, saunas, saunas, right?

That's a small room, up 55%. And they have all surpassed Q3 2020 consumer interest levels. So that is bullish data. So how do you turn that bullish data into action? Well, I was looking at Lifetime Fitness, and they just went public on October 7, 2021. And so when you go public, there's this thing called the blackout period or the quiet period.

For 40 days after listing, management cannot say a word. They can't say things are going great, things are going poorly, they can't tell their friends, they got to be quiet to follow SEC guidelines. This is so there's no unfair advantage for anybody to trade the stock. So here's the thing, folks, the Yelp 3Q 2021 economic average report talks about stuff that ended on September 30, the calendar year, that's the end of the third quarter.

Now given LTH went public on October 7, management cannot say anything for 40 days after. So in other words, they can't say anything until mid November 2021. So as an investor, you've got to think about the future, you've got to always try to connect the dots and predict the future.

Now based on the Yelp 3Q 2021 report, things are booming in the fitness and gym space. And LTH is in the fitness and gym space. It has more like a luxury resort fitness and gyms with 150,000 square feet and indoor space and stuff like that. But it is my opinion that management has seen those strong third quarter results, but it just can't say anything because it's in the quiet period.

It would violate SEC law. Therefore, management of LTH and perhaps other fitness companies that operate gyms are just biting their lips, bursting to say something positive, but they cannot because they don't want to go to jail or get fined. But as retail investors, we can do what we want based on our analytical minds and how we connect those dots.

So for me, I'm going to be buying some health and fitness stocks. I think it's one of the last reopening trades. You've seen airline stocks come back from 2020 lows, hotel stocks. Some of them are doing really well. Like Hilton is doing really well. Airbnb is up like 8x since Silverlake bailed them out in mid 2020.

And then a lot of the hospitality, private real estate deals that I follow, that I invest in are doing well. The demand is there, right? It's going to take years to play out to see how well they do, especially for those ones that you invest in in last year or this year 2021.

But the demand is there. So you've got to think what's next. For me, you know, the S&P 500 is at $4,500. I think it's probably going to continue going higher because the earnings trend is your friend. But instead of chasing momentum all the time or just buying at all-time highs, which is generally played out and done well, you also want to look at some contrarian names that have lagged and that could do well once the hype starts.

So in my opinion, when we all start to think about our weight and our health at the end of the year and what are the two largest, most popular New Year's resolutions every single year, that's get richer. And the bull market has helped us do that. Listening to this podcast and reading personal finance sites like Financial Samurai hopefully have helped you do that.

But the one thing that has lagged is our fitness because we're all stuck at home or a lot of us are. The average weight gain is 29 pounds and the average man is 200 pounds and the average woman is like 166 pounds. I mean, that's a lot, folks. So we got the money.

Well, at least investors have more money now. But if we don't have commensurate health improvements, I don't know whether all that money will really matter if we start feeling sick. So that's my thesis, folks. Use online data. It's out there. Pay attention. Track those data points because sometimes they come true and they give you some insights into what actions you can take to make more money.

Now, of course, none of us know the future. Right. So my investment in health and fitness could clearly backfire. Maybe COVID comes back again and people go back into their homes. Who knows? But that's investing. There's never a guarantee. If you want to guarantee you just keep cash under your mattress or you buy CDs up to $250,000 per person and then that's guaranteed.

But if you want to be an investor, you've got to look forward. You've got to connect the dots and see what's out there. So that's my thoughts. If you have any negative viewpoints about the health and fitness center, why it's not going to come back and any other kind of reopening trades, I'd love to know.

Leave a comment in the post. And if you enjoyed this podcast, I'd love a positive review. I'll talk to you guys later.