CD: Firing on all Cylinders

01/02/2004 12:00 am EST

Focus:

John Dessauer

President, John Dessauer Investments, Inc.

"In recent years, Wall Street pros were too optimistic, only to be humiliated as stocks kept on falling," says global, value investor John Dessauer. "Well, guess what? Now they are going to be humiliated again, this time by being too timid. They are in for a shock. This is a time for us to be fully invested."  Here's his top pick.

"Cendant (CD NYSE) just about doubled in price last year. Normally after a double, caution is advised. Not so in this case, because last year’s move was a recovery, not a march to new high ground. This year, Cendant is likely to make another substantial upward move. The reason is the economy. Strong economic growth is good for business travel, leisure travel, and housing. For the first time in many years Cendant is headed for a time when all of its businesses will be firing on all cylinders. Until now real estate has carried the earnings growth while travel remained a cash cow but not a source of growth."

"In December Cendant said that holiday bookings at its hotels were up 11%, a signal that leisure travel has improved significantly. Management also says that there is excellent 2004 growth opportunity in the integration of Budget with its existing car rental business. Cendant has strong cash flows, is paying down substantial amounts of debt, is buying back shares, and now will pay a dividend. These are all signs of a strong company that is getting stronger. Estimates for last year are $1.42 rising to $1.60 this year. My expectation is that Cendant will beat expectations this year. Management guidance is for 2004 earnings between $1.55 and $1.62. I am going to stick my neck out again and estimate 2004 earnings at $1.70. Cendant is a top pick for 2004."

Related Articles on