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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week

Wyndham Worldwide

February 23rd 2016

Wyndam Worldwide
NYSE Symbol: WYN
Industry: Hotels
Price as of Feb 23th: $70.26

 

          After a dismal start the year, the major averages have put in a nice two-week rally. Thanks to a 300 point rally followed by 200 point rally and a couple two hundred plus point rallies, the Dow is now 1100 points off the recent lows sitting at the best levels since the first week of the year. A lot of the selling year to date is coming from sovereign wealth funds. Sovereign wealth funds are typically state run investment funds from oil rich countries. During the good times, these countries diversified their profits and surpluses into global equities. Now that these oil rich countries are no longer running surpluses, they need to raise cash and reserves to fund government programs. The low oil prices are sparking fears of a global recession. And while many countries around the global may be slipping into recession, the US economy for now is holding up strong. One good indication of US economic strength is coming from corporate management and insider buying. It's one thing for management to talk up their stock and issue share buybacks to soak up the stock options exercised by management, but now we're seeing CEOs and other top executes from a broad section of the economy putting their money where their mouths' are buying their own stock with their life savings. The listing of companies and the shear dollar amounts are impressive. In the financial sector, we've seen insiders buying of at least a million dollars' worth of their own stock in the last month from the likes of Citigroup, CIT Group, Zions Bancorp, Huntington Bancshares, American Express, PNC Financial, Legg Mason, Key Corp, Raymond James, and JP Morgan. In the tech space, the CEO of Akamai Tech has initiated a $10 million purchasing buying plan. Disk drive maker, Seagate which sports a dividend yield of 8.4% saw insider buying of more than a million last month. In the Industrial space, United Tech which actually reported strong earnings and in line guidance saw one insider buy over a million dollars' worth of stock a few weeks back. We've also seen insider buying in select oil companies like Northern Oil & Gas, Hess and Anadarko Petroleum. Warren Buffett has been buying up Phillips 66, an oil refiner. The retail space has also seen insider buying at such companies as Lands' End, Sears Holding Company, Ruby Tuesdays, American Eagle Outfitter, and Walgreens. In the short term, the market may move lower, but with all this insider buying from so many industries, I'd like to think the fundamentals look good for a nice rebound later this year. The travel and leisure sector, one of the most economically sensitive sectors is also seeing insider buying. The largest insider buyer  at more than $100M over the last three months has come from Steve Wynn at Wynn Resorts a stock we highlighted back in October and December. Since then the stock is up 19%. This week we'll highlight another travel and leisure stock with insider buying, Wyndham Worldwide.

            Wyndham Worldwide saw three different insiders buy shares last week beginning with, Chairman, President and Chief Executive Officer Stephen P. Holmes acquired 25,000 shares on Wednesday at a weighted average price of $64.44, lifting his stake to 890,178 shares. Furthermore, Franz S. Hanning, Chief Executive Officer and President of Wyndham Vacation Ownership, reported purchasing 10,000 units of common stock on the same day at an average price of $64.91, which are held by a grantor retained annuity trust (GRAT). After the recent purchase, the GRAT holds a stake of 30,000 shares. The executive also holds a direct ownership stake of 26,241 shares, which does not include restricted stock units. Last but not least, Director James E. Buckman purchased 1,600 shares on Tuesday at $63.77 apiece and currently owns 5,998 shares (excluding deferred stock units and restricted stock units). The combined dollar amount of insider buying was $2.3 million.

                Wyndham's stock was down 27% over the past 12 months, but there are several nuances that point to a potential rebound in the upcoming months. The company recently reported revenue of $5.5 billion for 2015, which marked an increase of 5% year-over-year. At the same time, its reported net income reached $612 million or $5.14 per diluted share, compared to $529 million or $4.18 per diluted share reported for 2014. Most importantly, Wyndham's management anticipates generating revenue in the range of $5.8 billion to $5.98 billion for 2016, which is above analysts' expectations of $5.72 billion. 2016 is also expected to be the sixth consecutive year of double-digit growth in full-year adjusted diluted earnings per share.

Wndham Worldwide's board of directors increased the quarterly cash dividend from 42 cents to 50 cents per share beginning in the first quarter of 2016. The company also repurchased 2.2 million shares of its common stock for $165 million in the fourth quarter of 2015. In addition, the board approved a $1 billion increase in the share repurchase authorization.

                Wyndham's stock is up pretty good in the last week, but even with the run up, the stock still trades for 13 times earnings, 11 times next year's earnings, and one times sales. The stock also sports a 2.4% dividend yield. Private equity firm, Iridian Asset Management, founded by David Cohen and Harold Levy, upped its position in Wyndham Worldwide Corporation by 1.31 million shares during the fourth quarter, to 6.88 million shares for a dollar value of $440 million.