I have been holding this stock since November of last year (2018) and just this now that I remembered to make a post about it. Frontdoor (FTDR) is a US company. Their business is much like an insurance business. You pay a monthly premium and when something breaks, aircon, heater, toilets, door, windows, whathave you, they will come and fix it for you. Its a good business until last year.
Last year, has been a season of deadly typhoons. If you remember the super typhoon from last year, well, the US also encountered a super hurricane. And because of that, a lot of homes have been destroyed. So Frontdoor actually lost a lot of money repairing the members’ houses. So they made little profit from last year.
Because of the typhoon, the stock went down. I mean really went down. Down -30% in just a single day. I can still remember I was watching a movie when I see a red -30% on my watchlist for Frontdoor and immediately jumped out of my seat to take a look. I wasn’t going to buy Frontdoor because its valuations was high at that time (around P/E of 18 – 20). But when the -30% slide happened, it settled down to around 15 P/E. And I thought that, its probable that super hurricanes won’t hit the US every year, and Frontdoor can recover. Also, since Frontdoor is the #1 in its market, what are the chances that it can go bankrupt? And this is when I jumped the gun.
The ROE of Frontdoor is 20%. P/E of 15 when I bought at the price of $23.04. As of this writing, Frontdoor’s market price is at $27.91. Already up +21.14%.
I might have been lucky with Frontdoor falling like that. But I am not totally lucky. I usually bet big when I see opportunities like these where its so obvious that its a steal. But the thing about investing in the US is that it takes 3 days to transfer funds. And during that time, I don’t have enough dollars to buy more. I could exchange peso to dollars but it would also take a few more days. So I can only buy a few shares of Frontdoor which I regret, but have nothing I can do about. I don’t want to sell my other US holdings just to buy a new stock. I’m that lazy. But still, it can affect my US portfolio like any other stock in it. But still thinking about not having bought more lingers and pisses me off a little bit.
Note to self: Always have dollars.
You just demonstrated a Warren Buffet like move there! I remember the way he exploited an opportunity that arose from Amex’s Salad Oil Scandal back in 1960s in which his investment argument was that AMEX still has its credit card and traveller’s check business that can sustain and grow its business and deemed as long term competitive advantages.
Kudos to your investment choice! I’m happy and the same time envy you since I don’t have enough capital yet to invest in American companies.
Keep up the vigilance for more undervalued situations.
Maybe close enough. 😉