CoStar Group, Inc. (NASDAQ:CSGP)

This company serves real estate professionals by providing accurate information on US housing inventory. The company has been growing and acquiring at a brisk pace and is currently involved in a deal to acquire ForRent, a web service for renters. As US housing markets continue to heat up in the next few years this company could well stand out as THE source for valuable data on US homes, and eventually other developed countries.

I am not a naysayer or a doomsday predictor. This market is in new territory though, and it WILL come down sooner, rather than later. There are two strong predictors of serious crashes and those are the Shiller PE (CAPE) and Warren Buffet's favorite Mkt Cap to GNP. The CAPE goes back further, so let's look at that. There have only been three times before now that the CAPE (price to last 10 yr avg earnings or "Cyclically Adjusted PE) has soared past 25x. The Great Depression, The Dot Com boom, and the Housing Boom. All three times the market plummeted back down. The average 3 yr annualized return following these peaks averages about -19%. High PE and negative PE stocks will be absolutely obliterated, and this is one of those. I am calculating based on historical averages that the likelihood the crash has already begun is 27%. It's still more in the markets favor than not that the climb will continue, but each month that passes will eventually tip that in the other direction. So where are we going? I don't know, I can only go on history, and history does not always repeat itself exactly the same way. I do know though that I have made many successful stock picks based on books I've read and my personal experiences. History was the sole basis of every one of these books and every one of the decisions I made...When will the drop occur? Again, I don't know, I can only guess based on the averages of the amount of time it has taken in the past. In the Great Depression, after the CAPE reached 25, the crash happened within approx 300 days. The market during the dotcom and housing booms started its decline more than 4 years after reaching 25x. It will most likely be somewhere in between but this is one of only 4 data points so many outcomes are possible. I'm thumbsupfool, why the hell am I giving a thumbs down? Because this is a seriously overvalued time. One of the greatest in US market history.