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Value of Sabre Corporation

When you ask someone, "what is your expected annual return from investing?", if the answer is 50% or more, most likely this person is a beginner. If someone tells you that 10% is a satisfactory return, you might be talking with an experienced investor.

"Investing is hard. Anyone thinks it is easy is an idiot"---Charlie Munger. This post is to entertain people who deem 10% return as great. For these hoping to get 100% return, feel free to chase Tesla, Bitcoin, or mirage.

Good investment is bet that odds are on your side. Good investment is coupled with somewhat protected downside. It is my humble opinion that Sabre could be a bet with good odds.

My opinion below is for entertainment only. Never put your real money on my idea. 


There are dozens of airlines, hundreds of hotel chains, and a few big cruise companies. There are hundreds of millions of travelers. Each time some book a ticket, one cannot go to each of every airline's website to check price. Market desires centralized place for the transactions. This centralized  place connects buyers and sellers of the travel business. This centralized place has a name, GDS. 

As in many other industries that I have studied, GDS has been highly consolidated. 3 players controls 95% of the market share. Competition hurts profitability. From Standard Oil to Microsoft's OS, from Cornelius Vanderbilt's NY-NJ ferry to Oracle's database (in early days), moat from Mr. Buffett originates from multiple sources, monopoly (or near monopoly) is one of the biggest moat. Here we go about Sabre. This company has a dominator position in the GDS business. GDS business is a viable business with hard demand. 


Sabre has a market cap about about $1.4B, with debt of $2.9B. At normal time, its cash flow $0.6B. Please keep in mind that this in normal time before the virus. If at normal time, I am sure people will jump right into it. You get your money back in 2-3 years-- that is a steal. 

Virus and travel

Since the virus hit, Delta observed 95% drop in traffic. Other airlines probably have similar experience. The question of when the virus will go away is out of questions. Because nobody knows. As for life, we should know what we know for sure and focus on these to make our decisions. E.g., customer always wants their package delivered faster---this is not going to change. Customer's task might shift (ask Kraft Foods, General Mills about it). As a decision maker, making your business focusing on fast deliver vs guess what customer would like is more statistically better. 

No matter how the virus impact us, we are going to travel. Travel is coming back sooner or later. Unless a technological miracle removes the need of GDS, Sabra is going to have its share in travel. That is for every ticket you book, airline companies are paying $1-$3 each ticket. 


Debt is evil. Sabra has $2.9 long term debt. If Sabre's balance sheet is as clear as Southwest (another story worth telling), it is going to be an extremely safe bet. The possible of bankruptcy exists. However, I think it is still a good bet giving the fair to low price to pay. 


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