In a conversation with Oliver Renick on the TD Ameritrade Network, Chris Wang, Research Director of Runnymede Capital Management, discusses the Monday market selloff triggered by fears of the Evergrande looming missed debt payment. There is clearly risk given that Evergrande is the #2 property developer in China with over 200,000 employees, 800 projects in 200 cities, and $300 million in debt. However, we do not believe that this is the next Lehman and China will step in to bail out the company or at least have an orderly restructuring of the company. So far the interbank rates do not reflect the same fears of the equity markets as the TED spread is flat from Friday.

Chris and Oliver also discussed the big announcement from the Biden administration that lifts travel restrictions from foreign travelers in November if they are fully vaccinated and have a negative COVID test. This is a big first step in reopening international travel and the travel sector was one of the few bright spots on a sea of red in the markets.

Expedia has done a great job with a plan of cutting close to a billion dollars from its cost structure and this will provide huge leverage to the bottom line when demand returns. Street analysts are forecasting a return to 2019 profitability in 2022 and close to a double in profits in 2023.

Investors are also not fully recognizing Expedia's fast growing VRBO, alternative accommodation asset. It is a fierce competitor to Airbnb; however, Airbnb has a market cap of over $100 billion vs Expedia just $23 billion. Management could unlock value by spinning out VRBO or using a tracking stock to unlock the full value of VRBO.

 

Are you worried about Evergrande and the impact on the US stock market?

By Chris Wang