The Motley Fool: Looking at Booking

The name “Booking Holdings” might not ring a bell, but you’re probably familiar with some of its properties, which include Priceline, Rentalcars.com, KAYAK, Agoda and OpenTable. As consumers have shifted away from travel agents over recent decades, Booking has become the world’s leading online provider of travel services.

The company’s brands have become trusted resources for millions of travelers, driving outsize revenue and profit growth for many years. Its increased scale has also helped the company’s income grow. The stock has soared more than 2,000 percent over the past decade.

Although its market value was recently near $80 billion, Booking’s sales and earnings have been growing briskly. And the online travel market is still growing and represents only a fraction of total travel spending.

The company does face some competition, but it has been busy strengthening itself: Booking acquired FareHarbor, an online tour and events booking site; made a strategic investment in China’s biggest ride-sharing company, Didi Chuxing; and bought Asia Pacific-focused search tool HotelsCombined.

Wall Street believes Booking Holdings’ profits will grow by more than 15 percent annually over the next five years. Booking recently traded at a forward-looking price-to-earnings ratio below 20. (The Motley Fool owns shares of and has recommended Booking Holdings.)

Ask the Fool

Q: How can one learn about what risks a company faces? – H.C., Columbus, Mississippi

A: Companies don’t like to broadcast their risks and challenges, but publicly traded American companies are required by the Securities and Exchange Commission to list them. Look up a company’s annual “10-K” report at websites such as SEC.gov/edgar.shtml or the company’s own website, and you’ll find a detailed review of its financial and operational health and progress and a thorough overview of the risks it faces.

For example, here are some (of many) risk factors cited in Apple’s 10-K for 2018 (and discussed in more depth there): dependence on “component and product manufacturing and logistical services provided by outsourcing partners, many … outside of the U.S.”; effects of “Global and regional economic conditions” on Apple’s “business, results of operations, financial condition and growth”; and reliance “on access to third-party digital content, which may not be available … on commercially reasonable terms or at all.”

Every company faces risks. They shouldn’t scare you away, but do consider them. Know, too, that companies can manage many of their risks. Ways to do this include insurance and locking in currency rates or commodity prices via futures contracts.

Q: What’s a mutual fund’s “load”? – P.D., online

A: It’s essentially a sales fee, typically charged when you buy into the fund. (Sometimes it’s charged when you sell out of the fund, and sometimes on an ongoing basis.)

Loads can be as high as 8.5 percent, but 5.75 percent or lower is more common. Fortunately, there are plenty of no-load funds; the vast majority of assets in mutual funds are in those with no loads.

My smartest investment

My mother worked as my dad’s legal secretary, starting during the Great Depression. He didn’t earn a lot, and he was often paid with things other than money, such as chickens or sausage. Banks weren’t paying a lot of interest then, either, so my mother invested whatever she could in stocks. For example, she spent $80 on 10 shares of Union Pacific Railroad. (We had railroad employees and fans in our family.)

My mom’s strategy was to buy and hold, and she read the newspaper daily, following her holdings and looking for inspiration. She bought shares of the airplane maker Cessna because “All those war pilots coming home will probably continue flying!” As you might suspect, she did very well. Over decades, her Union Pacific shares grew and split, and her original $80 investment ended up worth thousands of dollars.

Investing in stocks can certainly be a way to gamble if you “play the market,” but from my mother, I learned not to do that, and instead to be a long-term investor. I keep fees low, too, sticking with no-load mutual funds. – M.D., West Palm Beach, Florida

The Fool responds: What a great example your mother set! Being a financial role model can help kids be good money managers later in life, achieving financial security. Many ordinary people have amassed fortunes by patiently buying and holding great stocks.