FLT - Flight Centre Travel Group

[wonderrman]

Re: FLT - Flight Centre

Your quote came about because Keynes blew up while leveraged although his idea was ultimately correct. So your quote has everything to do with leverage.

The story involved might, but the underlying theme does not have to revolve around leverage, and that is what I was refering to mate. It applies to any stock they you believe is "cheap" that heads a lot lower because of the markets inefficiencies.

 

[prawn_86]

Re: FLT - Flight Centre

The story involved might, but the underlying theme does not have to revolve around leverage, and that is what I was refering to mate. It applies to any stock they you believe is "cheap" that heads a lot lower because of the markets inefficiencies.

But without leverage it is a lot simpler risk vs return equation, and the most that can be lost is the initial investment. Comes back to another saying "only invest what you can ultimately afford to lose" (in an absolute worse case scenario)

 

[skc]

Re: FLT - Flight Centre

On a fundamental view of FLT, even if the economy worsens i think FLT will remain profitable. I have confidence in their management team. Corporate travel accounts for a lot of their earnings, and while business' may cut back on 1st and business class, they still need their staff to travel. The fact that they are in a near monopoly position is also a huge advantage. If the economy does get to a point that you think it will (and i think its a possibility also) then other travel agents will be going broke before FLT, meaning consumers will have to use FLT more and more in that situation.

Exactly why fundamental analysis is so hard to get right. If market shirnks by 10% but FLT market share increase by 5% (i.e. larger share of a smaller pie), are they better or worse off? Unless you know exactly their current market share, margins etc it is very hard to quantify.

I don't believe FLT is a near monopoly at all. There are many ways to book airfares. There are only 2 things I am quite sure about:

1. Air travel is highly leveraged to the economy, and risk of economy getting worse is very real.
2. Bricks and mortar travel agency is a mature, if not declining, industry.

So FLT prospects look poor both short and long term.

FLT are alos diversifying into pushbikes, they own the 99bikes set of stores. This may seem an interesting diversion but pushbikes outsold car 4:1 worldwide last year, so it could (hopefully) proove to be a good move.

This is interesting, but I can't understand what sort of synergies is there with their travel business?

 

[freddy2]

Re: FLT - Flight Centre

Refer to previous post. I use charts to time my trades so possible entries change. Obviously there is less opportunities at the moment due to the market. I would say though if I was using funnymentals to buy I would much rather be in somethng like BHP.

IMO BHP is one of the worst fundamental buys on the market. At a market cap of $115 billion with average earnings (ie non bubble, non recession) of about $10 billion pre tax. Compare to FLT with a market cap of $0.6 billion and average earnings of about $0.1 billion pre tax. And that is not even considering the poor long term economics of the resource sector - highly capital intensive and little product differentiation.

Leverage has nothing to do with it. The quote is saying that you can buy a stock at .30 and think it is cheap, but then it can go down to .20 or .10 or .5 before it heads back up, if it does at all. This might not be rational, but the market is an irrational beast so this can happen.

Leverage has everything to do with remaining solvent. You really only seem to understand 1/2 the quote. Without debt/leverage I can remain solvent forever, at least as long as the market remains irrational.

 

[skc]

Re: FLT - Flight Centre

The story involved might, but the underlying theme does not have to revolve around leverage, and that is what I was refering to mate. It applies to any stock they you believe is "cheap" that heads a lot lower because of the markets inefficiencies.

You can only go insolvent if you owe someone money.

However, if your quote is about pain tolerance or balls of steel, then leverage is not required.

 

[Sean K]

Re: FLT - Flight Centre

And that is not even considering the poor long term economics of the resource sector

Lots of assumtions here and this takes the cake.



What FLT need to do now is set themselves up for the next bull, which is around the corner. The US and Europe are still going to be their main play, but in the next 20 years, 3-6 billion Asians are going to be able to afford overseas holidays as well, on top of increased business travel.

When they survive this short to mid term disaster, they'll come out with an even greater market share probably, after all the minor players have collapsed.

 

[prawn_86]

Re: FLT - Flight Centre

This is interesting, but I can't understand what sort of synergies is there with their travel business?

Very early on, but these are my thoughts on why the have done it:

Cycle sales etc are growing and this provides an extra (small) income stream as a way of diversification.

The synergy i can see is that FLT will be able to sell cycle tours through its wholesaler, Infinity. Admittedly its not much of one, but perhaps they have other ideas also for synergies.

I can remember seeing somewhere (BRW i think) that FLT management see the cycling sales industry in Aus as very fragmented, which is similar to what the travel agency was to when FLT started. So they want to try and set up a similar thing with various stores so they can have a bigger buying power etc. It will be interesting to watch its development.

RE bricks and mortar - its amazing how many people still book their travel through agents. Last stat i saw was >80% of people (thats 80% of all travel) still book with agents. Lots of reasons such as saving time, organising whole packages, agent has the responisibility if things go wrong etc etc

 

[freddy2]

Re: FLT - Flight Centre

Lots of assumtions here and this takes the cake.

Really? The resource sector has gone through numerous boom/bust cycles over the last 100 years with alternating periods of undersupply (boom) followed by periods of oversupply (bust). There is required large amounts of capital spending/reinvestment and little to no difference between the same product produced by different companies. The resource sector is a prime example of an industry with poor long term economics, another is the memory (DRAM) manufacturing industry.

 

[freddy2]

Re: FLT - Flight Centre

RE bricks and mortar - its amazing how many people still book their travel through agents. Last stat i saw was >80% of people (thats 80% of all travel) still book with agents. Lots of reasons such as saving time, organising whole packages, agent has the responisibility if things go wrong etc etc

http://www.theage.com.au/travel/tra...king-pros-and-cons-20090402-9ksi.html?page=-1

Jane E. Fraser finds the death of the travel agent has been greatly exaggerated.

When it comes to booking travel, the internet is king. Right? Online bookings are soaring, booking engines are reporting huge profits and traditional travel agents are suffering.

 

[Sean K]

Re: FLT - Flight Centre

Really? The resource sector has gone through numerous boom/bust cycles over the last 100 years with alternating periods of undersupply (boom) followed by periods of oversupply (bust).

Haven't we just bust? Just where do you think we are in the cycle?

World economics are at a standstill and may get a wose, but the 'bust' has probably occurred.

LONG term, we will recapture these losses. Will take some time, but it's inevitable.

The good companies warrant attention as fantastic LONG term opportunities.

Cripes, Chindia has only just started to develop. The 2000's are the millenium of Asia. This is a hickup in the grander picture.

Yes, my assumptions....

 

[wonderrman]

Re: FLT - Flight Centre

You can only go insolvent if you owe someone money.

However, if your quote is about pain tolerance or balls of steel, then leverage is not required.

This is exactly what I am meaning. Forgot the literal meaning of insolvent for a minute if you can. I am talking about the fact that if you a buy a company at $10 and it goes to $4 you will **** yourself. Most people do anyway. This is why I don't agree with funnymental analysis, you can buy something at $5 cause you think it is cheap but it can keep on heading down, so you keep on buying. Your trying to catch the falling knife. Why bother. Buy things that are going up.

On a fundamental view of FLT, even if the economy worsens i think FLT will remain profitable. I have confidence in their management team. Corporate travel accounts for a lot of their earnings, and while business' may cut back on 1st and business class, they still need their staff to travel. The fact that they are in a near monopoly position is also a huge advantage. If the economy does get to a point that you think it will (and i think its a possibility also) then other travel agents will be going broke before FLT, meaning consumers will have to use FLT more and more in that situation.

This is all well and good but I have no interest in how there going to cope because from a top-down short-term view the economy is in the poo. The only interest I take in mgmt is when they are buying. You comment on consumers going to FLT is taken on board, but what happens when there are hardly any consumers who want to travel? Like we are seeing now.

Funnymentals is out of my league so those comments probably sound stupid. W.

 

[prawn_86]

Re: FLT - Flight Centre

You comment on consumers going to FLT is taken on board, but what happens when there are hardly any consumers who want to travel? Like we are seeing now.

In this case you get what has happened now. Profit has gone from 150 mill to about 80mill (rough figures at work so cant get exact ones).

The point i was trying to make is that there is a certain proportion of the population that HAVE to travel, and i think/hope/assume that even if only that proportion travels, then FLT would maintain profitability.

If the economy does reach worst case scenario, whole countries will be going broke, so virtually every stock will be wiped out also, so in an absolute worst case, everyone is screwed, not just me...

 

[ROE]

Re: FLT - Flight Centre

This is exactly what I am meaning. Forgot the literal meaning of insolvent for a minute if you can. I am talking about the fact that if you a buy a company at $10 and it goes to $4 you will **** yourself. Most people do anyway. This is why I don't agree with funnymental analysis, you can buy something at $5 cause you think it is cheap but it can keep on heading down, so you keep on buying. Your trying to catch the falling knife. Why bother. Buy things that are going up.



This is all well and good but I have no interest in how there going to cope because from a top-down short-term view the economy is in the poo. The only interest I take in mgmt is when they are buying. You comment on consumers going to FLT is taken on board, but what happens when there are hardly any consumers who want to travel? Like we are seeing now.

Funnymentals is out of my league so those comments probably sound stupid. W.

Different people look at different way to invest, so to me if you are good and comfortable with your method then stick with it whether it's fundamental or technical.

To me buying a stock is like buying into a business, when it reach a price
that I think provide reasonable return I buy and if it offer even cheaper price I add a few more to it.. I then forget about it and it give me an income year in and year out and as long as the fundamental doesn't change too much I stay in the business or unless some other business present a better value then I take earning from one business and invest in that one.

An example I would give someone if they ask, imagine I run a resort
and it earn me $100 a year for the last ten years and while the good time roll on Mr market may offer to buy my resort for $1500

suddenly out of no where a snow storm happen that year
and hardly any tourist turn up and my earning is now down to $30
and Mr market offer to buy my resort for $200

Would I sell at $200 ? probably not Would I buy more at $200 I sure would knowing in good time earning will be back to $100 a year or close to it... Mean while people walking by and fly by and only see the resort earning $30 a year and it look like it may go under so they either don't want to know or don't want to buy but instead opt for more trendy stocks that lose money but may promise a better future

A couple years went by and people start to go to the resort again due to excess debt they take out for holiday or their home equity and the resort is now making $50 a year and people start seeing this bugger is actually making money and jump on the bandwagon and drive the stock up, then next year it make $60 bucks while the trendy stocks gone belly up and people chasing stocks that actually earn money ....

Mr Market is hyper happy and I call it a day and cash out and look for another resort that just had a big storm and look like it's about to die.

Knowing which business has a stormy year and buy into it is the key.. many business has a stormy year but never recover those you want to stay away like ABS, Allco, Babcock and what can give you the information to sort this out is their annual reports and their business structure
understand that, then you are 98% of the time will pick a champion that suffer a cold, and like all champion they will come back better and stronger.

 

[Rainmaker2000]

Re: FLT - Flight Centre

Wonderrman, are we seriously having a debate about the worth of fundamental anaysis......doesn't it seem strange to you that it's a fundamental investor and not a trader, who is the richest man in the world (depending on the day) in Omaha.....starting with near nothing........it's not chartists that rival him either, it's self made entreprenurs......the ultimate fundamental investors

Regarding FLT, despite all the speculation, I reckon the boat has already sailed...and the market knows it...does it seem strange to anyone that FLT announced a massive profit downgrade and the share price has gone no where near its recent lows......

The reason why is that the worst has gone and smart money has flowed in........

Last few days, I've been booking a Kakadu safari for a few weeks.......and anecodotal evidence backed what Scroo Turner said the other week, "a distinct change in trading in April"

For the sceptics, and why not? Remember, when your trading stock is at all time price lows, its not the producer that benefits, but the retailer who does not care if its a $999 return LA trip.......they still take their cut

In this way, FLT is very similar to the banks right now.....near term earnings are falling, but people have worked out margins on core banking operations are soaring...........stock prices are going up despite near term earnings going down.........

The stock market is indeed a predictive mechanism and gees I'm looking forward to Kakadu.......

 

[So_Cynical]

Re: FLT - Flight Centre

Just out of interest what other 'blue chip' stocks do you think has more long (5+ year) potential?

ou ou i know 1 :bekloppt: a stock in potential transition into a major player
in an evolving industry where the old players haven't got a clue....lest
that's the way i see it

World economics are at a standstill and may get a wose, but the 'bust' has probably occurred.

LONG term, we will recapture these losses. Will take some time, but it's inevitable.

The good companies warrant attention as fantastic LONG term opportunities.

Totally agree...and ill add that we have prob seen production levels for many minerals/metals
that wont be surpassed for prob another ten years...due to so many new projects getting
shelved, and just look at so many of those projects with low grade ores and big big Dev costs.

The existing producers that have lowered production will be the ones to reap the rewards over
the next decade or so.

 

[ROE]

Re: FLT - Flight Centre

http://www.theage.com.au/travel/tra...king-pros-and-cons-20090402-9ksi.html?page=-1

Jane E. Fraser finds the death of the travel agent has been greatly exaggerated.

When it comes to booking travel, the internet is king. Right? Online bookings are soaring, booking engines are reporting huge profits and traditional travel agents are suffering.

I seen it many times over, the video kills the radio stars, etoys will wipe out toys r us, Yahoo will out run Coca Cola earning in the new world economy.. The mining boom is stronger and longer and anything that doesn't have mining ties is probably not worth considering.

IAS will take away tabcorp corporate booking market share yet IAS is a losing money operation and tabcorp pay nice 70 cents dividend a year

People don't book travel via agents any more, they all done online, everyone has internet right? yet each day I go pass FLT stores I see people queue up taking to agents..such strange phenomenon and my work buddies travel oversea and I ask did you book online, oh no too much hassle we book via FLT agents

people like to chase the promise of tomorrow but not what they already have at hand.. I'm the old school a bird in hand = 2 birds in the bush or more ....

Until people actually understand the business, they will be driven by fears and that create opportunity for patient people who has nothing to lose but wait for this sort of opportunity walk into what people thinking is a shinking ship and walk out with the best furnitures.

I wonder how many people actually truly understand FLT operations? and I can tell you FLT is not just about booking tickets

 

[ROE]

Re: FLT - Flight Centre

Wonderrman, are we seriously having a debate about the worth of fundamental anaysis......doesn't it seem strange to you that it's a fundamental investor and not a trader, who is the richest man in the world (depending on the day) in Omaha.....starting with near nothing........it's not chartists that rival him either, it's self made entreprenurs......the ultimate fundamental investors

Regarding FLT, despite all the speculation, I reckon the boat has already sailed...and the market knows it...does it seem strange to anyone that FLT announced a massive profit downgrade and the share price has gone no where near its recent lows......

The reason why is that the worst has gone and smart money has flowed in........

Last few days, I've been booking a Kakadu safari for a few weeks.......and anecodotal evidence backed what Scroo Turner said the other week, "a distinct change in trading in April"

For the sceptics, and why not? Remember, when your trading stock is at all time price lows, its not the producer that benefits, but the retailer who does not care if its a $999 return LA trip.......they still take their cut

In this way, FLT is very similar to the banks right now.....near term earnings are falling, but people have worked out margins on core banking operations are soaring...........stock prices are going up despite near term earnings going down.........

The stock market is indeed a predictive mechanism and gees I'm looking forward to Kakadu.......

and did you know Scroo Turner top up more shares quietly at recent low outlay another cool $383,000 for the privilege

Wonder why he didn't buy when it was $30 buck but buy now when things look gloomy. Sound like my tourist resort stories to repeat great Uncle Ben quote.

"Short term the market is a voting machine, Long term it's a weighting machine"

CCP was voting machine last year, this year it seem like a weighting machine plus extra 6 cents spare change dropped out due to dividend payments weight heavily on the scale

 

[prawn_86]

Re: FLT - Flight Centre

This is what I am talking about with FLTs market position. Harvey World Travel is a fairly big player and if they go bust its probably going to be good for FLT. FLT might even be able to pick up some of their assets on the cheap if they see anything they like.

Stella operates the Breakfree, Peppers and Mantra Hotels holiday accommodation brands across Australia. The group also operates about 1200 travel agencies through the Harvey World Travel, Travelscene and Gullivers Travel Group.

THE global Stella tourism empire, which owns the Harvey World Travel chain and manages one in five Gold Coast holiday apartments, is in danger of collapse, threatening to cost banking giant UBS hundreds of millions of dollars

http://www.news.com.au/business/story/0,27753,25373533-462,00.html

 

[wonderrman]

Re: FLT - Flight Centre

I'm sorry I haven't replied to this topic for a few days I have been busy.

I'm not getting into an arguement with you funnymentalists as I cannot be stuffed wasting my time. Someone's comment regarding Buffett is meaningless as just because one person uses fundamental analysis very well doesn't mean other people can. You can't be a Buffett unless you have billions of dollars and are able to manipulate markets or have the inside scope. That is the thing about fundamental analysis its hard to win because so many people are analysing a company and know what you know. Unless you are an inside trader or have enough capital to manipulate markets then you can't be a Buffett. People will probably comment on how Buffett came from $0 to make his huge fortune. I would say yes that is true and Buffett is an extrodinary individual unlike anyone else who has done very well. The useage of Buffett as an example to demonstrate the success of fundamentalism is no good as it only proves that one person has done very well out of it, it doesn't mean others can at all unless you are as gifted as Warren Buffett. There musn't be many people out there who are because I don't see to many other value investors in the Forbes Rich List.

I would also comment that traders can and have made money in this market even though it is in the ****. Buffett hasn't and has lost money like most other fundamental analysis. I would ask Rainmaker what your loss has been over the past 18 months while you have hold on to stocks that have fallen. A proper trader might have made a loss, but a bit a small one due to stop losses. A fundamental analyst propably bought FLT at $19 when it fell from $27 or $11 when it fell from $19. A chartist would have seen that it was clearly in a downtrend and would have stuck away and waited to the reformation basing pattern (stage 1) begun. For me, technical analysis at least provides some probability as you can have quite a good hypothesis of what is going to happen. Even if you make a mistake you use tight stops and it will be a small one. Rather, fundamental analysts simply perform a valuation of the company that takes a long time and take a stab at the purchase accordingly. You can jump in a clear downtrend and lose a lot of capital, both on paper and mentally.

Now, I have enclosed a chart on FLT if anyone is interested. A lot of damage has been done and I expect a consolidation and form of a base between 4 and 7 before any significant gains can be made.

wonder.

 

[prawn_86]

Re: FLT - Flight Centre

Wonder,

I agree with you Re: Buffett, his is exceptional circumstances, but thats not to say that no money can be made from fundamental buying (as opposed to trading).

While not wanting to speak for Rainmaker, it appears to me that you are not taking dividends or timeframe into consideration. I am Treasurer of an organisation whose constitution binds them to invest very conservative. This organisation has held the same 2 stocks for about 15 years. Even at current levels they are still sitting on a capital gain AND they have collected dividends along the way which have equated to more than the total originally invested. Even after those co's cut divs this year the organisation is still getting a 10% pa return on their initial investment. Remeber that div yeild is diffeent for everyone depending what their buy price is...