Why Orbtiz Shares Sputtered

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Orbitz Worldwide (NYSE: OWW  ) were losing altitude today, falling as much as 13% after a major investor sold part of its stake in the online travel merchant.

So what: PAR Capital Management dumped 8.1 million of the 24.6 million shares it held, a decision which Paul Reeder, president of the investment group, said was to "better diversify our portfolio." Reeder stood by Orbtiz, saying that he was "optimistic" about the company's future, especially growth in the hotels sector. Orbitz shares jumped by more than a third last week after a blowout earnings report led by strong performance in its hotel segment.

Now what: I wouldn't get too worked up about today's drop or PAR's sale, since the investment fund is holding on to more than two-thirds of its holdings in the stock. Selling nearly 10% of shares outstanding will naturally depress the share price, but after the run Orbitz has been on lately, still up about 300% after today's tumble, it's easy to see why PAR would want to "diversify." I'd be more concerned about Orbitz's valuation after such a spike in share price, as earnings have not kept pace. With a forward P/E of 27, the travel dealer has high expectations to live up to.  

There's no question Orbitz shares have had a huge year, bringing home multibagging returns, but they may not be your best bet for long-term growth. That's why Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars with you. It's a special 100% FREE report called "6 Picks for Ultimate Growth." Just click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.



Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2593218, ~/Articles/ArticleHandler.aspx, 7/24/2014 3:29:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement