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Sydnee Gatewood
Sydnee Gatewood
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David Rolfe Comments on Booking Holdings

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July 13, 2020 | About:
Booking Holdings

After a holding period of several years, we decided to liquidate our position in Booking Holdings (NASDAQ:BKNG) during the second quarter. We trimmed our position earlier this year, as the COVID-19 outbreak unfolded and we deployed proceeds into better opportunities elsewhere, but a combination of a significantly worsening fundamental picture and a recovery in the stock led us to sell our position entirely.

There has been no fundamental change to our view of the quality of the business model or the management team, and we wouldn’t be surprised if the stock found its way back into our portfolio again. However, the outlook for industry fundamentals quickly became much worse than we previously had anticipated, and we think normalization may be a multi-year process. Furthermore, comparing global travel and hospitality data to trends in Booking’s consensus estimates at the time we decided to sell our position, we believed even reduced expectations for the company’s results still were too high, likely by a considerable amount. In fact, shortly after our sale, Booking reported much worse than expected first quarter booking trends, coming in -30% below lowered expectations. In addition, the Company reported that April was even worse, with booked room nights collapsing -85% in the month.

Despite the superiority of the business model, and despite the fact that we expect Booking’s competitive position to emerge considerably stronger from this crisis, we believe there will be an extended period of adjustment before travel returns to anything like normal, meaning it will be a long time before we can call Booking a “growth company” again, and we can deploy the proceeds somewhere more attractive until then.

From David Rolfe (Trades, Portfolio)'s Wedgewood Funds second-quarter 2020 shareholder letter.

About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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