THL - Tourism Holdings

[BlackPeter]

Interesting Beagle. Do you think a bearish sharemarket will effect travel plans of many travelers intending to book caravans ? It may be possible, but I wouldn't think so. I'd argue that the rosy economic forecasts around the World and good growth in wages in USA and Europe will have more influence, a positive one. Agree with you that we are very likely to see lowering of PE's for many stocks in coming months. Hopefully THL and some others will report good earnings to support current SP and dividends.

Share market is typically a precursor to the economic development. Share prices drop because the market thinks that the current growth is likely to strangle itself (with higher interest rates, wage increases, skill shortages). Lots of "positive" feedback loops around which can quickly turn into negative growth:

increased interest rates and higher wage bills -> company earnings drop -> reduced consumer confidence;

increased interest rates - higher mortgage bills -> less money for discretionary spending;

Share prices drop -> individual net worth dropping -> reduce discretionary spending (like this expensive NZ or US trip);

Reduced discretionary spending -> Company earnings drop -> unemployment increasing;

I am sure we all can add more of these "positive" feedback loops.

Sure - we don't know, whether this current (US markets) correction turns into a crash or a bear, but assuming THL just gets unbattered through this storm might be a risky strategy.

Keep safe out there ...

[Beagle]

Interesting Beagle. Do you think a bearish sharemarket will effect travel plans of many travelers intending to book caravans ? It may be possible, but I wouldn't think so. I'd argue that the rosy economic forecasts around the World and good growth in wages in USA and Europe will have more influence, a positive one. Agree with you that we are very likely to see lowering of PE's for many stocks in coming months. Hopefully THL and some others will report good earnings to support current SP and dividends.

Five trillion has got wiped off the value of world share markets at the lows of the recent correction. Its not cheap to travel here or to the U.S. and good campervans at circa $350-400 a day aren't cheap either. If the market rout continues logic suggests some people would pull their horns in and have a cheaper holiday instead. I like the company and its had a fantastic run but is trading well above the long term steadily rising trend line. It looks vulnerable to a pullback to me.

[JeremyALD]

I don't agree with the logic of the above. The US has had a massive run and a 10% pullback has just put the share market to where it was three months ago. There are some other stocks on much higher PEs than THL with lower growth.

Further to this NZ is only 5% off its highs and the OCR is predicted to stay flat this year. A slightly dropping share market is not going to make any difference to people's travels plans (maybe a few but not enough to make a significant difference). The world economy is in one of its strongest growth phases ever. Tourism will continue to do well because the younger generation are more connected and care about experiences than the previous generation.

THL remains well positioned and are going to get a big tax bonus from their US businesses. Now in saying this I didn't have THL on my year end picks because growth is factored in and I think the current price is fair, however if they continue to grow at reach their target of 50m NPAT which I'm sure they will I wouldn't be surprised to see steady growth in the SP over the next couple of years.

[cymonger]

Back in 1997 or so, I was a bartender in Chicago. I has saved my first $10,000 and wanted to do something for my "future self." A lot of big traders came in to the bar I worked at and I asked for some advice. I told one of these guys I was considering buying Walgreens stock. He said, "Do you want to be a wealthy man? If so, take that 10,000, buy that stock, and request those certificates. Then put them in a drawer and don't even THINK about opening it for another 20 years. For years I wanted to get those things out and sell them. The stock would go up, it would go down, and I worried I would lose all my money.

But in the end I waited those 20 years and now that 10,000 has secured my future for a long time. When you are almost positive a company will grow in the foreseeable future, they have produced great results in the past, and you believe in the validity of your research, this is how you build wealth. I firmly believe THL is one of these kinds of companies. So many people want to come to New Zealand, and it's not remotely expensive relative to what it used to be even 20 years ago. This is a "drawer" stock as far as I'm concerned. Sure the craziness in the US market, the fact it shot up so quickly in the last few months, and a high PE may have a slight affect on the stock in the short run, but who cares? Put it in the drawer and look up in 2022 when it's at 10+ if you must. That's my play here.

[Cricketfan]

When you are almost positive a company will grow in the foreseeable future, they have produced great results in the past, and you believe in the validity of your research, this is how you build wealth. I firmly believe THL is one of these kinds of companies. So many people want to come to New Zealand, and it's not remotely expensive relative to what it used to be even 20 years ago. This is a "drawer" stock as far as I'm concerned. Sure the craziness in the US market, the fact it shot up so quickly in the last few months, and a high PE may have a slight affect on the stock in the short run, but who cares? Put it in the drawer and look up in 2022 when it's at 10+ if you must. That's my play here.

Yeah I think that's what it means to be a long term investor, which is the strategy I'm trying to adopt. I see that some people here claim to be in a company for the long term, but at the first hint of some short/medium term volatility, they're out and buy something else for the 'long term'. (Not saying that's a bad strategy, just not what it means to be in something for the long term)

[BlackPeter]

I don't agree with the logic of the above. The US has had a massive run and a 10% pullback has just put the share market to where it was three months ago. There are some other stocks on much higher PEs than THL with lower growth.

Further to this NZ is only 5% off its highs and the OCR is predicted to stay flat this year. A slightly dropping share market is not going to make any difference to people's travels plans (maybe a few but not enough to make a significant difference). The world economy is in one of its strongest growth phases ever. Tourism will continue to do well because the younger generation are more connected and care about experiences than the previous generation.

THL remains well positioned and are going to get a big tax bonus from their US businesses. Now in saying this I didn't have THL on my year end picks because growth is factored in and I think the current price is fair, however if they continue to grow at reach their target of 50m NPAT which I'm sure they will I wouldn't be surprised to see steady growth in the SP over the next couple of years.

... and you are absolutely entitled to your opinion as well as beagle is entitled to his and I to mine ;

I guess they say what goes up must come down - but nobody can predict in advance when the trend changes - it is all just about personal views, opinions and likelihoods. If we all would agree on the future, there would not be a workable stock market.

Just be careful to rely on official (or any other) "predictions". While there are at any point in time plenty of analysts happy to predict 10 out of the last 3 downturns ... how often did you see a reserve bank accurately predicting the next downturn in their OCR / growth forecasts?

Problem is - the economy is a type 2 chaotic system. It is not just unpredictable, but any attempt to predict whats happening will impact on the systems behavior rendering this very prediction useless.

[cymonger]

Yeah I think that's what it means to be a long term investor, which is the strategy I'm trying to adopt. I see that some people here claim to be in a company for the long term, but at the first hint of some short/medium term volatility, they're out and buy something else for the 'long term'. (Not saying that's a bad strategy, just not what it means to be in something for the long term)

Amen to all that man. From my own failed experience, trying to time the market is simply a way of subtracting brokerage fees from my portfolio. The markets are such a fascinating mirror of people's fear and desire. Historically markets always go up in the log run. We have years of data to back that up, and yet people continue to think short term rather than long. As I said on another thread, "If you're right about the "why" of a stock it's not important to worry about the "when."

Best of luck to you cricketfan. Cheers to your wealthy future self!

[sb9]

Amen to all that man. From my own failed experience, trying to time the market is simply a way of subtracting brokerage fees from my portfolio. The markets are such a fascinating mirror of people's fear and desire. Historically markets always go up in the log run. We have years of data to back that up, and yet people continue to think short term rather than long. As I said on another thread, "If you're right about the "why" of a stock it's not important to worry about the "when."

Best of luck to you cricketfan. Cheers to your wealthy future self!

Well said...

Yeah I think that's what it means to be a long term investor, which is the strategy I'm trying to adopt. I see that some people here claim to be in a company for the long term, but at the first hint of some short/medium term volatility, they're out and buy something else for the 'long term'. (Not saying that's a bad strategy, just not what it means to be in something for the long term)

Very aptly put...

[Beagle]

No argument its a good company with sound long term growth prospects. I wouldn't for one second try and make any case otherwise.
The point of contention as far as I am concerned is whether this is already fully built into the SP ?
The tripling in SP in the last 3 years is well ahead of earnings growth and has been predicated upon a quite considerable expansion in the PE multiple. The 50 cent jump from $5.50 to $6.00 just before Christmas was based on the tax rate change in the U.S.
The SP is fine if the growth continues at pace but this is now a more heavily geared business than it was so the risk profile has changed and any prudent investor needs to recognize that.

THL's SP performance reminds me very much of the time when RYM's SP tripled in three years leading up to 2014 to ~ $8.50 when I called it as overdone and although nobody would argue against RYM also being a fine company the fact is until very recently the SP did ostensibly nothing for the following three years simply because it got to far ahead of itself in 2014.

None of this will be any concern to young ones planning to hold this for the next decade but anyone approaching retirement can be forgiven for asking themselves is there better value and growth at a cheaper price SUM where else in a needs based business ? I made the correct call on RYM nearly 4 years ago and its SP has materially underperformed the market since then despite being a great company with solid growth and an excellent outlook.

I'm going out on a limb here and making the call that there's growth companies at a cheaper price elsewhere. I could be wrong but am happy to back my own judgment and have the stretched PE of RYM example to support my thesis. Good luck to holders and as mentioned if you're in for the very long haul I think you should do well, just keep that seat belt fastened All that said I'm overdue to get something badly wrong, maybe its this one...

[DarkHorse]

You're right about "timing the market" as a whole cymonger, but I think beagle makes an important point on considering how much growth the market has priced in to individual stocks - as compared to comparable businesses - at any one time.