Disclaimer: This is not investment advice but my personal (and often unqualified) opinion. PLEASE DO YOUR OWN RESEARCH !!!
Background & Intro
Long term readers of my blog might remember a certain obsession with travel companies over the past few years. Among other posts, the main analysis were these ones:
Part 1 – Lastminute.com
Part 2 – Expedia
Part 3 – Trivago
Part 4 – Flight Centre – book review
Part 5 – Flight Centre
Part 6 – Tripadvisor
Part 7 – Tripadvisor (cont)
Part 8 – GDS (Sabre, Amadeus etc.)
Part 9 – Expedia (cont)
Part 10 – AirBnB
With the exception of a short, mildly successful (and very lucky) speculation in Expedia, I found the sector as “too hard” for me to invest as too many things were moving at the same time:
The more I look into those companies, the more difficult the sector seems to become. There is a lot of fundamental change going on, Which on the one side is good for agile players but on the other hand makes it very difficult to predict anything and extrapolate trends from the past.
As a Value Investor, unpredictable fast-moving industry changes are difficult. In order to invest in such a sector, there should either be a significant moat and/or fantastic management or a very cheap valuation.
So why now looking again at a travel company ? To be honest, I was motivated by a comment from “Celebrity investor” Philipp “Pip” Kloeckner in my Twitter feed as I introduced HomeToGo as a part of my “Bumsbuden Wikifolio” where I collect German shares that I think are staying away from makes a lot of sense.
Pip commented that he has a very different opinion, which is not surprising, as he is sitting on the Supervisory board and seem to hold around 100k shares that he received for consulting in the early days of the company.
A quick “post mortem” on three stocks that I recently exited: Expedia, Cars.com & Record Plc. All three were disappointing in absolute or relative terms and especially in two cases I really made mistakes.
Some days ago, I sold my Expedia shares with a small ~10% profit, although the stock dropped by almost -30% in one day after the Q3 result announcement.
What happened ? Well, Google travel seems to have taken a big dent out of Expedia’s business. I even wrote about Google travel some months ago but didn’t actually do anything. This was my takeaway back then:
I invested into Expedia in February 2018 after the stock had become cheap enough. The idea was that a stock in a secular growth sector (online travel) should do well in the long run. After pretty decent fulll year 2018 numbers, with double digit increases in both, top and bottom, line, the first quarter 2019 showed a clear slowdown. Topline growth slowed to ~4%. Excluding Trivago which is still shrinking, topline sales would have grown +6%. Underlying profitability has improved although the first quarter is always the weakest one.
What I found interesting is the fact that Expedia performed better than Booking com. Here is a stock price comparison (including Tripadvisor and Trivago):
This is the follow-up post on the intitial Tripadvisor post from last week.
So where is the upside ?
After “bashing” them in the first post, the question is: Is there an upside and if yes where ?
CEO & Capital management
With Steve Kaufer, the CEO, one of the founders is still on board. His salary is rather modest but he got plenty of options awarded in the previous years. According to Bloomberg, he received option in the original value of ~33 mn USD in 2014 to 2016. He owns shares in an amount of 17 mn USD, which is not huge but still not insignificant.
In his 2016 letter to the shareholders he writes the following:
So this is part 6 of my little travel series. Previous posts were:
Part 1 – lastminute.com
Part 2 – Expedia
Part 3 – Trivago
Part 4 & 5 – Flight Centre
Tripadvisor is clearly one of the most well-known names in Online Travel. The company was founded in 2000, but was then acquired by Interactive Group in 2004 and rolled into Expedia. In 2011 the company then was spun out and listed separately. Similar to Expedia in true John Malone style, there are two entities listed: Tripadvisor and Liberty Tripadvisor.
A logical follow-up to lastminute.com is clearly Expedia. Why ? Well, firstly because I use it personally (for flights) and secondly because it is one of the leading “OTAs”.
Expedia started in 1996 as a division of Microsoft and did an IPO in 1999. They have a pretty detailed company history web page.
The idea to look at lastminute.com came from my gocompare post, this is what I wrote back then:
Peter Wood hired the former CEO of lastminute.com, Mathew Crummack.
He seems to be a smart guy, however I haven’t seen anything from him about the future strategy yet. The new CFO of GoCompare ist the old deputy CFO from Esure. So the top managers from Esure seem to have preferred to stay.
I haven’t looked that deeply into LastMinute.com but it seems to do better since he left…(note to myself: check Lastminute.com).
As I have quite a lot of travel related companies on my ToDo list, I decided to start a kind of “mini travel” series, similar to my “Watch series”. As I like to travel myself a lot, I think this should be lots of fun to look into those companies.
Lastminute.com is a company based in Switzerland which initially went public in 2014 under the (strange) name “Bravofly Rumbo”. They started out as a website to offer cheap flights in Italy and Spain.-