Tuesday, December 13, 2005

Shuffle up and deal.

I was forced to make a tough decision with my money.

If you ever get me talking about stocks, you know I'm going to quickly mention Cendant, Stericycle, PetSmart, Microsoft, and a few others.

So this morning as I was reading the news I saw that Cendant dropped 10%. So naturally I wanted to know why people were selling. So I read Cendant's news. They warned that they would be on the low end of estimates on earnings. I thought and thought and thought about that. Than I decided, I am fine with that. They are largely a travel company, and people just haven't been traveling as much (I am assuming) since gas prices shot up. They alluded to struggling with overseas travel, and they fired the head of that division. So should the stock retreat 10% because they are on the low end of estimates? I don't think so. I also looked at their financial statements to see if I could find anything I didn't like. I found that last year they had nearly $5Billion in cash flow from operations, and their market cap as of today was $16B. Thats when I knew I had to buy more.

But I don't (ever) have any cash. I had to look at all of my investments and see which one I thought had the weakest prospects for appreciating. This was very hard. I like everything I own, otherwise I wouldn't own it. I think all of my cash is wisely invested right now. But I had to buy Opportunity. I had to buy Cendant. So I sold my shares of Stericycle. I didn't want to. I bought it at 45 nine months ago, and sold it at 62+...(thanks Hadz!). It's performed well for me, and I think it's still got room to go up, perhaps to 70-80 in 2006...for another 10-20% return. But I think Cendant will be between 25-30 in the next 24 months...(compared to it being at 16.5 today)...for nearly a 100% return. I had to sacrifice a great company, to get a better opportunity.

Was it the right decision? I won't know for a few years.

Any thoughts?


Anonymous Anonymous said...

You got balls

Wed Dec 14, 05:49:00 PM EST  
Blogger Greg said...

you can't make babies without balls.

Wed Dec 14, 08:07:00 PM EST  

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