Thomas Cook finally made a pathetic apology to the parents who tragically lost their children on a Thomas cook holiday, to which an inquest found Thomas cook had ‘failed in their duty’ to the parents.
The new CEO also said, sales had not been affected – but the full damage to their brand and reputation will not be realised immediately – and time when will tell whether the public will forgive them. For TCG this was a disaster in public relations and worse still the suffering the company has put the parents through.
2CentView has sold it’s entire core position in $TCG at the current Fair Value of 155 .
Do not want to own a company which can treat a customer who has gone through such a tragic event in the way they have done – they only apologised after they realised comments on Facebook were damaging their reputation and brand – they are now giving 1.5m to charity after receiving 3m – very little of which has gone to the family.
Shares in Thomas Cook have been drifiting around the 125 area since Harriet Green got ousted.
Green was seen as too aggressive for this 140 year old UK travel company and the hope for a 250+ stock price faded on her departure.
Now the Chinese Investment firm Fosun has taken a stake – by issuing new shares diluting existing stock holders by 5% and buying an addtional 5% in the open market could be the growth driver to push this stock above 200.
FV still 155 in $TCG – with the the dilution this becomes around 148 – this implies a modest growth of 8% over 5 years – so if you believe Fusion will drive growth to 15% or more over 5 years, this could propel the stock above 200 over the next 12 months.
Hold if you have a core posiiton, adding more around 135-140 if you sold some of the core position after Green’s departure.
The 2CentView portfolio was up 12% fo the year, which matched the S&P500 but well above the FTSE100 (flat).
The portfolio ended the year 75% US and 25% UK 0% Europe – mainly because the US was the only market showing real jobs growth and a rising stock market – the model also showed many more opportunities in the US than outside the US. The exposure to USD/GBP exchange rate is also something to keep an eye on – sterling strength representing a buying opportunity for US Stocks – but can go the other way!
Where it did badly:
2 Core positions were savaged – Blinkx (down 90%) and $TCG (thomas cook) which cost the portfolio nearly 6% – need to do a better job managing zero cost core positions – where you can take your eye of the ball.
Europe and US House & Autos continued to underperfrom and took losses in Deutsche Bank, HSBC and $USG and $GM – all go cut on the 25% Stops (they continued to go lower – except $GM which has come back – thanks EBOLA!)
Also took some losses in $FUEL, $GIMO, $ICPT on the rotation out of expensive growth stocks into more low growth stocks – growth positions are the riskiest and hardest to manage as moves can be savage.
Where it did well:
$AAL- American Airlines, $SAVE did very well up nearly 100%
$FB up 37%
$CELG and $ISIS – up nearly 80%
$YHOO – up 40% – easiest trade of the year!
$AAPL – up 50%
$MS – Morgan Stanley up 30%
Rite Aid and Radian also performed well (core positions from 2013)
2014 was in general lot tougher than 2013 as the market experienced volatility throughout the year – Russia/Ukraine, EBOLA, Oil price collapse – all tested the nerves – but also represented buying opportunities.
The 2CentView strategy of taking some profits, setting stops helps build low cost positions and mitigates losses from positions not working – this really helps in managing volatile markets – and helps you sleep at night – we all have day jobs!
Overall the portfolio is up 73% since beginning of 2013 when the model and strategy was first built.
Main lesson learnt from 2014 – be more selective and if a core position drops more than 30% – start to exit – even if it is because of a malicous blog!
So 50% of the portfolio was up average of 51% =25.5% on the winners
30% portfolio down 25% = -7.5% on the losers
FT reports over the weekend there was a difference between Harriet Green and Chairman, who decided she needed to go abruptly.
Success can get to your head – Green no exeception – she did steer the company from near bankruptcy back to financial health – with a well timed rights issue with net debts of around 150m from 850mm.
But her view of the future prospects of the company and a long term stock price target gearing towards 250 were at odds with what the chairman – and the new CEO – who clearly think that this was not achievable and needed to be reigned in – hence the timing of the announcemnt was designed to get the stock lower in antcipation of a guide down in future earnings…
But this could have been handled much better – with stock now at 126 – only 8% lower the panic created was all for nothing – the stock price already was pricing in a certain degree of circumspect (around 50%) of whether the results and guidance set by Green were achievable.
$TCG FV now = 160 (from 180) – so still upside potential of 25% , forward p/e now 9x – and there is a chance the dividend will be restored.
If you believe the new CEO Peter Fankhauser is the right person and can face the challenge of bringing more business on line and the competitive threat from Expedia and PriceLine, then stick with $TCG. He Is German and they are good at running travel companies (TUI!)
$TCG’s announcement that CEO Green is to step down on the day results were actually quite good, with Sep 2014 EPS coming in at 11.3p 2p above consensus estimates is either amazingly stupid or Green thinks the fundamentals of the business are out of sync with Analyst forecasts and wants to drive the stock down 20%!……
As right now we do not know which one it is, 2CentView is you should sell some or all your position and and re-evaluate the market’s reaction to the new CEO and see whether EPS forecasts are revised by Analysts – there is a presentation today.
2CentView cut it’s core position today in half at 109.
What does the World Health Organisation actually do and why does a hospital in Dallas have no clue on how to deal with an EBOLA Case.The WHO and the CDC have shown huge incompetence in dealing with EBOLA – and how does Africa let the disease spread to 3 countries?
Now OBAMA appoints a ‘Czar’ (Ron Klain) to sort out the mess and Cameron wants Europe to spend a Billion Euros!! Hopefully these actions will restore the public’s confidence and people will travel and book holidays.
Unlike SARS EBOLA can only be caught by physical contact and the 21 day incubation period has passed since Thomas Duncan left Liberia on Sep 19th – but no new cases – reported at least.
This is a nervous time to invest in travel stocks but the sell off could be an opportunity to buy US AirLines or Thomas Cook – but the crisis may not yet be over so buy half your position now and the the other half when the crisis begin fade OR Sell if it becomes a bigger problem – the virus looks nasty!
AAL FV = 52 vs 33.4
DAL FV = 40 vs 34
UAL FV = 60 vs 44
$TCG(Thomas Cook) continues to trade down, hitting the 120 stop level if you got in around the 140 area.
Consensus target price and 2CentView Fair Value remain unchanged – so clearly the market is not agreeing with Analysts and have concerns about the negative news flow from other names in the travel sector like Jet2.
An important key to long term shareholder value in $TCG is being able to continue to cut costs and transform the digital strategy – something Harriett Green is working on but may take time to implement and playing catch up with TUI.
Cut your position if you are nervous about the results or the outlook for the the travel industry.
2CentView has a trading and core position in $TCG.