In hindsight, Thomas Cook was a no-brainer purchase. When two master stock pickers recommend a stock, do you still have to think and ponder over whether you should invest into the stock?
Prof. Sanjay Bakshi himself did well by piggy-backing on Prem Watsa’s broad shoulders. Prem Watsa’s explanation as to why he chose Thomas Cook for investment was inspirational:
“You will understand the great growth potential of this company when you realize that currently only one million Indians annually travel outside India for holidays. This compares to some 40 million outbound tourists in China and hundreds of millions of outbound tourists in the western world.”
Now, since the time Prof. Sanjay Bakshi bought Thomas Cook and recommended investors to buy (Rs. 54), the stock has surged 50% + to the CMP of Rs. 82.
Prem Watsa gave a clear hint that he would use Thomas Cook as a vehicle to make further investments. The first indication of this was when Thomas Cook acquired a Bangalore-based HR solutions firm called “Ikya” in 2013 for about Rs 256 crore.
Then Watsa categorically told Economic Times that “Thomas Cook is a free cash flow business. As the cash flow comes and we invest it in India, we might bring some additional money from abroad into India.”
Now the second indication of this is the news that Thomas Cook will buy Sterling Resorts at Rs 125 per share (Sterling’s CMP is about Rs 98 per share).
Now you must remember that Sterling Holiday Resorts is itself backed by investment legends Rakesh Jhunjhunwala and Radhakrishna Damani. While Rakesh Jhunjhunwala holds 3.67% of Sterling’s equity, Radhakrishna Damani holds 6.47%.
Now, this deal, if it happens will be a brilliant strategic masterstroke by Prem Watsa.
Sterling has about 67,000 members who will use Thomas Cook’s facilities and vice versa. It is vertical integration for a travel services company to provide hotel stay to its customers, the ET pointed out.
So, keep a look out for Thomas Cook. If there is a nice deep correction, don’t forget to tuck into the stock.