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Strategies & Market Trends : Value Investing

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To: gizwick who wrote (21915)	8/17/2005 10:20:31 AM
From: Spekulatius	Read Replies (1) of 78715

re Travel stocks - Travel stocks are too risky, IMHO, in this environment. High fuel costs eventually passed on to consumers and terrorism means less travel and thus less profit for travel related businesses. . I don't think this simple logic applies. Of course it is true that less travel means less business for a transaction facilitator like Travelocity or Expedia. however i do believe that gross margins will go the other way. With less travel, Hotels and airlines will be more desperate to fill their room/seat capacity. If you read the analyst & earnings reports reports you find that the recent boom in travel has reduced their margins. Both EXPE and TSG have become wholesale operaters, securing large chunks of capacity and selling them individually, right now they are having trouble to buy capacity at a reasonable discount, LT I bet they won't. Even if above logic were not true, TSG and EXPE don't have huge fixed costs and depreciation on fixed assets.I would be much more scared owning stock in hotel or rental car companies.

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