Should You Buy Flight Centre at These Prices?

What does Flight Centre do?

Flight Centre Travel Group Ltd [ASX:FLT] is a travel retailer with operations around the world. It operates under a number of different brands, including Flight Centre, Escape Travel and Student Flights.

What’s happening to FLT’s share price?

Today, FLT reported first-half earnings, with the company downgrading full-year earnings guidance due to heavy discounting of international airfares and adverse foreign-exchange movements. The stock price fell sharply on the news, but recovered as the day went on. By the afternoon, FLT’s stock was down nearly 3%.

What now for Flight Centre Travel Group?

This is the fourth profit downgrade from FLT in the past two years. Clearly, its business model (with a retail shop presence) is under pressure.

FLT is basically a middleman, and the internet is taking revenue away from these types of businesses.

You can see that in the chart below. FLT has seen its share price decline over the past two years, from a high of around $47.50 to below $30 today.

Flight Centre Share Price Feb

Source: BigCharts

That tells you the business model is struggling for relevance in a world where more and more people book their holidays online, cutting out the middlemen.

As the share price remains in a downtrend, and the pressure on profit growth continues to weigh, I wouldn’t be buying FLT at these prices, despite the prospect of it looking ‘cheap’ after such a prolonged share-price decline. Avoid.

Never assess a stock’s fundamentals without looking at the chart too. Combining fundamental analysis with charting can yield powerful results.

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Greg Canavan
Editor, Money Morning


Greg Canavan is a Feature Editor at Money Morning and Head of Research at Fat Tail Investment Research.

He likes to promote a seemingly weird investment philosophy based on the old adage that ‘ignorance is bliss’.

That is, investing in the Information Age means you have all the information you need at your fingertips. But how useful is this information? Much of it is noise and serves to confuse, rather than inform, investors.

And, through the process of confirmation bias, you tend to read what you already agree with. As a result, you often only think you know that you know what is going on. But, the fact is, you really don’t know. No one does. The world is far too complex to understand.

When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases.

Greg puts this philosophy into action as the Editor of Crisis & Opportunity. As the name suggests, Greg sees opportunity in a crisis. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines traditional valuation techniques with charting analysis.

Read correctly, a chart contains all the information you need. It contains no opinions or emotion. Combine that with traditional stock analysis and you have a robust stock-selection strategy.

With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the basic, costly mistakes that most private investors do every time they buy a stock.

To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Money Morning here.

And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here.

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Money Morning Australia