Carmine-
In 2/96, when CUC announced the acquisition of SIER and DAVD, the stock was trading at ~$26. The day it was announced, the stock got clobbered, proceeding to fall 30% by April. That was probably due to the high price of the acquisitions and the confusion as to why CUC was buying software companies. Forbes said at the time to trust him; he said the deals were going to be very good for CUC. It turns out that he was right. He is an excellent businessman, and I trust that the HFS merger will be very good.
The market's reaction was typical. I think HFS shareholders may be selling more than the CUC shareholders, since HFS stock has been forming a broad top over the past year and has declined significantly in recent months. Also, CUC shareholders are getting a better deal, since the deal is accretive to CUC, whereas it's slightly dilutive to HFS. I agree that the stock may not move a whole lot until after the merger is completed. But there's no law that says HFS and CUC can't both move higher.
If you're short term, I'd recommend another stock. But if you're long term, I'd hang in there, and maybe buy more if the stock goes lower.
I think CU will be a hot stock in 1998 and 1999.
Todd |
