Question:
Hi. We’ve owned Wyndham Worldwide for about three years now. Wanted to see if you thought it might be time to sell. I think we bought shares when it was around $15 or $17.
Answer:
Wyndham Worldwide Corp. (NYSE: WYN) offers individual and business customers a variety of hospitality services and products across various price ranges through its brands, which include Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Howard Johnson, and Wingate by Wyndham, to name a few. If you purchased it at $17, and the stock now sells around $52 per share, by general principal, we think you should sell at least half. We do not think the stock has much higher to go. It currently trades around 17 times earnings. The time to buy a hotel stock is when it is coming out of a bottom of a recession when no one is traveling. Wyndham has likely played out the cycle. We would be tempted to hold some of the stock, but we definitely think you should take some profits.
Question:
I wanted to get your opinions on Mead Johnson Nutrition. I was thinking this might be a decent defensive position as people are still having children.
Answer:
Mead Johnson Nutrition Company (NYSE: MJN) is a global pediatric nutrition company behind the Enfa family of brands, including Enfamil infant formula. Mead Johnson Nutrition boasts a portfolio of more than 70 products, which sell in more than 50 countries. The company’s beta is 0.70, so you are right about it being defensive. It is a good company, however it is pricy, as it is selling for 25 times earnings with a growth rate of only 11%. Add the dividend of 1.7%, and we believe that the stock is not a good fit right now. We suggest keeping an eye on the stock, and waiting until it is beat up in the market before investing. If you own shares, we think it is OK to hold.
Question:
I was doing just my average look at stocks online, and I noticed Priceline’s price. Are they crazy? I’m guessing the stock has never split or paid a dividend. But what justifies a price around $600? Why is it down almost 17% today (Wednesday, Aug. 8)? I know the service, but its competitors aren’t selling for nearly that much. What is so special about this stock?
Answer:
Priceline.com, Inc. (NASDAQ: PCLN) is an online travel company that offers hotel room reservations, as well as, reservations for car rentals, airline tickets, vacation packages, destination services and cruises.
The stock often trades at a price of more than $600; however, it is important not to confuse a stock’s actual price with its valuation. The stock’s price to earnings ratio is currently 23.50, which is about 17% below its five-year average price to earnings ratio. This indicates that the stock is trading at a discount to its historical valuation based on this measure. Shares of Priceline.com also have a long-term growth rate of 21%, which is above its peers as well. You should consider a stock’s price to earnings, price to book, and price to sales when evaluating its value and not base it off the actual dollar price at which the stock trades.
The company had a bad quarter with Europe’s recession. Without a lot of travel to and from Europe, the company suffered. However, the company is pretty strong, with $26 per share in free cash flow and $70 per share in cash. With a growth rate of 21%, the stock does not look like a bad pick; however, given the continued uncertainty in Europe, we would not buy at this time.
Question:
I’m comparing CBS and Viacom. They look pretty similar, except Viacom offers a higher dividend. What’s your two cents?
Answer:
We would not buy either CBS Corporation (NYSE: CBS) or Viacom, Inc. (NASDAQ: VIAB). We prefer The Walt Disney Co. (NYSE: DIS), as a media conglomerate holding. We consider Disney more diversified with movies, the ABC network, ESPN and the Disney brand. While you should watch at what price you purchase Disney, we consider it to be a core holding. If you own shares of Viacom, you may consider holding. We do not recommend holding shares of CBS.
At Henssler Financial we believe you should Live Ready, which includes looking at just more than what price a stock is selling. If you have questions regarding your investment holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
