Picking Through the Rubble of Cendant
Web Editor, "Mad Money"
In Confessions of a Street Addict, Cramer lays out in horrid detail the ringer that Cendant put him through when he was running his hedge fund. The criminally mismanaged company ended up costing him more money in a day than any other stock in his trading history.
Cendant did it to him again when Cramer said that investors could make good money if the company broke itself up. Well, it did break up, and then the stock dropped, leaving our sad clown looking pretty stupid – until now.
Finally, Cendant split up on July 31, 2006, and the pieces, when added together, have since increased in value by over 32%. The Cendant name had to be eliminated before any of its components could start making money. But there is one laggard that Cramer thinks could be a great investment: Wyndham Worldwide.
Wyndham, mainly a timeshare business but which also owns the Ramada chain, has been kept under the thumb of Cendant’s bad reputation when the rest of the company’s businesses have broken out. Realogy, the real estate firm, is being bought by Apollo Management. Travelport, which was never public, was bought by the Blackstone Group. Avis is up 32% this year on speculation that it might get taken private like Hertz and then quickly spun out again as an IPO. Poor Wyndham is barely more than $2 up from the price at which it was spun off from Cendant, and it’s trading at just 17 times next year’s earnings.
Cramer says that now every piece of Cendant is a takeover target, Wyndham included, and it’s time that company started to trade with some kind of a takeover premium. If the Four Seasons can be taken over at 45.5 times earnings, then Wyndham is way too cheap, Cramer says.
One red flag to watch out for here is that Wyndham has $2.9 billion in debt on the balance sheet. But for a cheap baby-boomer vacation play with a takeover target on its back, Cramer thinks it’s too good to resist.
Bottom Line: Cendant’s children are being taken over or taken private first. Cramer likes Wyndham as the laggard of the group.
Questions? Comments? firstname.lastname@example.org