This $1,000 was quickly created, with renting my house out on Air B’N’B ($800), doing some Market Research ($100) and then using savings from loyalty programs from my supermarket and pet shop towards the project along with taking my lunch to work….these combined efforts created another $100…giving me a total of $1,000.
- Please read General Disclaimer – this is not advice!
With this money, I decided to add to my current Flight Centre holdings. Two reasons for this investment decison….the first is that the stock is off 15% since I last purchased it, which means that if I buy another $1,000 now, I am lowering my average purchase price and can hopefully benefit from any recovery in capital grwoth over time. Secondly, the stock has a PE Ratio of 12.5, when the sector has an average ratio of 16.5. This indicates to me that the stock is undervalued, which makes sense considering that Flight Centre has coped a lot flack in the media with concerns over consumers being comfortable with booking directly online rather than through an agent earning commission. However the dividends are fully franked and paying a strong and consistent dividend of 4.7% p.a. (again higher than the average for this sector).
Whilst the long term risk remains for Flight Centre, I am still comfortable buying this stock as the company is sufficiently large enough and has enough brand awareness to adapt to these consumer trends in the long run. And booking volumes continue to strengthen, giving them more buying power and better savings to pass onto consumers. Buying this stock raises my estimated passive income from $1,789 p.a. to $1,836 p.a. meaning that I am 45.9% of the way to achieving my goal of $4,000 p.a. by October 2017.