One of Warren Buffetts famous investing sayings is be fearful when others are greedy and greedy only when others are fearful. Or, in other words, sell when others are buying and buy when theyre selling.
But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.
So, in this series of articles, were going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so, and what might have made them decide to do so.
Phenomenal
Thomas Cook Group (LSE: TCG)has had a phenomenalchange of fortunes over the past few years.After losing more than 96% of its value between March2010 and November2011, when it dipped below 9p, Thomas Cooks share price subsequently rocketed more than 2,000% in little over two years, hitting 186p in January of this year.
Since then its fallen back somewhat, but even at todays 126p, that still makes Thomas Cook a more than 14-bagger for anyone prescient (or just plain lucky) enough to have bought in at its nadir.
The credit for the spectacular turnaround wasgiven largely toHarriet Green,who was brought in as CEO in July 2012, when the companys share price was still languishing in the mid-teens, and its finances were a shambles.
Despite having no experience in the travel industry her previous job had been as CEO ofelectronics supplier Premier Farnell for six years Ms Green took a firm grip on Thomas Cooks finances,swiftlyreducing costs through extensive job cutsand store closures, and restructuring its capital base to deal with its significant debts.
And it worked. To remarkable effect.
Shock
Just over a year ago, Ms Green said that her performance should be judged after five years. Andas recently as 20 November she told the Inspiring Women conference that You cant do a transformation on this sort of scale in a year or two years..
So, when it was announced last Wednesday (26 November) that Ms Green would be leaving Thomas Cookwith immediate effectafter only two-and-a-half yearsas CEO, the market was shocked enough to send thecompanys share price plunging. At one point it had plummeted almost25%, dropping below 105p during trading that day.
The news was made all-the-more shocking because it came on the same day that Thomas Cook reported its full year results, which featureda 44% increasein underlyingprofit and a 22% decreasein net debt. Add to that the fact thatunderlying earnings per sharewere almost 20%ahead of forecasts, at 11.3p, and Ms Greens sudden and completely unexpected departure seemed all the more puzzling.
But as well as the financial highlights already mentioned, Thomas Cooks results alsosaid that the company was now facing tougher trading environment and that further growth was now expected to be at a more moderate pace. So perhaps Ms Green had done as much as she could shed rescued the company from near-oblivion, after all and it was time for someone with industry experience to take the reins.
Over-reaction
Step forward Peter Fankhauser, Ms Greens number two, and the person who had overseen the turnaround in Thomas Cooks key UK andContinental Europe businesses. Whatever the reason for Ms Greens departure, the company was at least going to be left with a safe pair of hands on the controls.
A 25% fall in value was certainly dramatic, and its likely many people saw it as a fearful over-reaction by the market. Certainly, enough customers of Motley Fool ShareDealing seemd to havethoughtit worth buyingshares in Thomas Cook last week to put the company in the number 3 position in the latest Top Ten Buys list*.
And their decision has been vindicated so far, at least with the share price havingrecoveredtonow stand at 126.7p. Thats only 8% below its close the evening before Harriet Greensdeparture was announced.
Of course, no matter what anyone else was doing last week, only you can decide if Thomas Cooks is currently a buy.
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Jon Wallis has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
*based on aggregate data from The Motley Fool ShareDealing Service.
