TSC's three-day series on Cendant (CD) inspired a flood of reader mail. Readers responded with praises, criticisms and even stories of their own.
Exactly one year ago I was finishing my Motley Fool self-taught course in investing for growth. i.e. get the value line list of growth stocks, do some "stuff" and buy the list of 10 stocks left. Cendant was on my list, easy. I was ready to get online April 16, 1998. Ta-da. By the time I got on, it had gone from 40 something to 19 1/2. I looked closer -- if it was good before, it should be better after. Bought some. Went up to 25, bought some more (what a genius I am!). Somewhere in October I sold the 19 stuff at 7, later when it got back to 16, I "dumped" the 25 stuff. By then I was glad to get that much. (Put the proceeds in
). "Accounting irregularities" means "head for the hills."
-- Richard H. Williams
Get Over It
Jim Cramer: While I like many of your articles, your piece on Cendant is really nothing but a smear job.
What about the current shareholders? On a day when Cendant has been up almost a point, or 5%, your article comes out and it is now dropping. I think you should not spend the rest of your life pursuing a personal vendetta against a company in which you unfortunately lost money. Please don't try to make yourself feel better by punishing current shareholders with your "power of the pen."
-- Susan Bower
So you lost money on Cendant? I was unaware that Cendant was the only public company whose stock suffered a nosedive in recent memory. I recall some other sure things (
, the oil-service sector) that were jewels to own. These suffered huge declines, but today DLJ listed Oxford as a "top pick." I would expect a "Wall Street veteran" to understand the risks associated with owning stock.
Prices rise, prices fall. And when a good company, like Cendant, falls in price, it's called "value."
Still Looks Good to Me
I only own 200 shares, but I bought after the crash. I feel it is a great buy and will probably continue to accumulate more. I do like the core businesses and feel the company is ready for a continued rebound.
What You Did for Summer Vacation
Jim, I always enjoy reading your columns. Don't fret about Cendant. You weren't the only one who lost a bundle, just the only one with the guts to admit it. My personal portfolio manager lost me a bundle, and he wasn't even on vacation.
Last year was not a good one for us.
bought our company, the ImagiNation Network, amidst many promises of spinoffs and IPOs. Those promises proved false; in February, my wife and I were both out of work in a small town in the Sierras that suddenly had a glut of unemployed computer professionals.
But at least we still had our stock options. A relatively few shares in
had grown and become shares in
, had grown some more and become Cendant. Almost every employee had cashed in all their options as soon as they became available, but we'd managed to hoard what was almost 3,000 shares. Since we had become former employees, we had to make a decision: Sell the stock, and take a huge tax consequence, or acquire the stock without selling, and hold it to convert it into long-term capital gains. We did the calculations.
We'd have had to borrow the $12,000 to acquire the options, costing us about $3,000 in interest. Cendant was selling around 40. We'd net over $15,000 on the deal, and possibly more if we found work and didn't have to sell. It didn't seem so dangerous. After a year, we expected to have a nest egg of nearly $100,000; maybe my wife could retire.
Then came April.
My wife's still unemployed. I've got a job for less money and an extra $2,000 a year just for the gasoline of the commute. Our marginal tax rate has dropped to the point where there is only minimal savings from long-term capital gains. We may save enough in taxes to pay back our expenses; we may not; depends on when we have to sell, and where Cendant is. Forget the hindsight issues of being able to sell at 40 and buy back in at 10. It's the foresight issue that kills us. We knew the risks, we were hoping to sell in the 40s but figured that even at 30, a huge 25% drop, we'd be better off. We've effectively exchanged peace of mind for a piece of a class action suit.
We know they've taken some extraordinary losses as ripple effects from the "accounting irregularities" but the remaining business looks very solid, likely to go up. Compare Cendant to so many Internet companies with no profits at all, and it's got to be a matter of time before Cendant rises.
I just hope we still are able to own some when that happens.
Cendant taught me that no stock -- no matter how big or widely held or well-respected -- is really safe. Now I know that my investments can go up in smoke overnight. What can I say? It's not a pleasant feeling. Maybe that's why I haven't bought any Internet stocks.
-- Robert Zelman
Give it a rest on Cendent. Good God, we've all lost money on stocks, quite whining about and go find GOOD stocks to write about. Anyone can write about stocks or companies that have failed.
Do You Ever Get That Funny Feeling?
About a week before the Cedant blowup, I felt that something was up with CD. The stock was just acting strange. I bought 40 April put options on CD but sold them 2 days BEFORE the drop. I just didn't give it enough time. I would have made close to $40,000 on those options.
My Loss Is Their Gain
I earned over 120,000 shares through stock options in a 10-year career with a company CUC acquired --
. My accountant had me divest into other stocks. But I still held over 25,000 shares when the bottom fell out. I am mad as hell at having put my trust, and my money, in a company that knowingly cooked their books -- and then Silverman has the gall to protect his "key" people by underwriting their income by restating the options price! They should feel the same pain all the investors have felt! And why have Walter Forbes and his cronies not been indicted yet?
What Bitter Irony
Great product, service, earnings and book value ... oh those accounting errors!