Cyprus on the Brain
Vacationing in Cyprus
I really like to travel, particularly to new places. Whenever I
read about a place, I think about going there.
So when the Cyprus banking crisis popped up in the news a week
ago, the first thing I did after digesting the proposed solution
(which fortunately, was quickly nixed) was research Cyprus.
Though I've been to 18 European countries, I've never been to
Cyprus; I've never even been to Greece. And Cyprus is, first of all
Greek. It was Greeks who settled it millennia ago. It was Greeks
who lived there even while under the rule of the Roman Empire, the
French, the Venetians and the English. And it's Greeks who
represent the majority of inhabitants today, somewhat shy of
And that's one big reason Cyprus is in trouble; its banks are
too exposed to Greek banks.
But no more talk about the banking problem. Today I'm focusing
on other aspects of life on Cyprus.
The most unusual fact about the island is that Greeks do not
control the whole island, only the lower two-thirds. In that
respect, it's a lot like Ireland, an island that's been officially
"shared" by two distinct cultures for nearly a century and has an
official dividing line that generally preserves the peace.
The difference is that Greeks have "shared" Cyprus since the
Turks invaded and took control in 1570! That's 443 years, and they
weren't all peaceful. But the Greeks were always the larger
population. Then in 1878, in the wake of the Russo-Turkish War,
Cyprus was leased to the British Empire, in exchange for guarantees
the British would protect the Ottoman Empire against any Russian
aggression. When World War I broke out 36 years later, Turkey sided
with the Germans, and Great Britain annexed Cyprus-controlling it
as a colony until 1960, when Cyprus was granted independence.
Now, independence is nice, but it's difficult when you're
divided by culture, religion and language. So the decades that
followed weren't easy. The last real fighting was in 1974, but to
this day, Cyprus remains divided, with the Turks in the northeast
of the island and the Greeks in the lower two-thirds.
Anyway, in 2004, Cyprus joined the European Union, and in
January 2008, it joined the eurozone. And now, just five years
later, the Russians once again are playing a pivotal role (not
willingly!) because Russian money (private, not state) in Cypriot
banks is perceived to be the solution to the current problem.
Between the geographic partitioning and the banking mess, Cyprus
may seem like a disaster area. But it's not. In fact, Cyprus has
been a great vacation destination for years, partly because of the
climate and partly because of the high standard of living on the
English people, in particular, like the island because of its
colonial history; English is widely spoken, and cars drive on the
left side of the road. And thanks to the network of low-priced
airlines in Europe, airfares are low. Looking at airfares from
Boston, I see that while it costs roughly $1,000 to get to Europe,
I can get a connecting round trip flight to Cyprus for roughly $150
Lastly, the hotel choices are huge. From the five-star Hilton in
the capitol city of Nicosia, to the $47-a-night Cactus Hotel by the
airport, there's something for everyone, and most have swimming
But what if you don't want to stay in a hotel, particularly a
soulless chain? What if you want to live like a regular person, in
a regular house?
One option is Airbnb. Located in San Francisco, the company has
been connecting travelers with homeowners since 2008. Today it has
over 300,000 listings in 192 countries. At Airbnb, the listing is
free; the company gets paid by taking a service fee of 6% to 12%
from every booking.
Using Airbnb, I found 249 opportunities to stay in Cyprus, with
the rock-bottom being an ocean-view (not oceanfront) private room
in a big apartment in Nicosia-with students who want visitors-for
just $10 a night. A great deal if that's your style!
At the top end, I found a complete two-bedroom beachfront
apartment with swimming pool for $469 a night, which actually
seemed overpriced. Overall, though, I'd say the website offers
something for almost everyone.
But you can't invest in Airbnb. The company is still private,
funded by at least $120 million from venture funds like Greylock
Partners and Sequoia Capital, as well as individuals like Ashton
Kutcher, who signed on as "strategic brand advisor."
But you can invest in
, which is actually the largest player in the vacation rental
field. And I recommend it, thanks in part to the research done by
Mike Cintolo, editor of
Cabot Top Ten Trader.
Here's what Mike Cintolo wrote just three weeks ago.
"With more than 720,000 paid vacation rental home listings in
168 countries, HomeAway is the world's leading online marketplace
of vacation rentals. These listings can be found on the company's
eponymous website, as well as HomeAway's other websites,
VacationRentals.com, VRBO.com and BedandBreakfast.com. The company
specializes in connecting tourists with property owners looking to
rent, providing rental owners and property managers a simple way to
manage online bookings. HomeAway also assists in advertizing and
marketing these properties via its network of websites. Business
has been brisk for HomeAway, with the company growing earnings by
an average of 10% and sales by at least 20% during the past six
quarters. During HomeAway's recent fourth-quarter earnings report,
the company said it delivered 22% revenue growth in 2012, with a
32% increase in free cash flow. CEO Brian Sharpels attributed the
growth to the company's significant strides in implementing its
long-term strategy. Looking ahead, HomeAway is zeroing in on the
continued rollout of its e-commerce capabilities, including a
pay-per-booking pricing model and distribution of value-added
One thing Mike didn't mention is his write-up is that while
Airbnb gets paid by the renter, HomeAway gets paid by the property
owner, most commonly on a regular basis, with yearly renewals. That
seems to be the superior business model.
HomeAway is based in Austin, Texas. And before I discuss how to
invest in it, I want to show you what I found in Cyprus using it.
That's part of the fun of researching travel-related stocks!
HomeAway has more than 1,400 Cyprus properties, substantially
more than Airbnb, and most are much more professionally presented.
At the low end, I found a private villa with pool for $65 a night,
which looked like a great deal. At the high end, I found a gorgeous
four-bedroom villa listed at $5,458 for a week.
Lastly, looking at the chart, here's what Mike wrote three weeks
"After opening at 27 following its initial public offering a
year ago, AWAY found little buying support and ultimately succumbed
to selling pressure. The stock plunged to a low near 19 by July,
where bargain hunters stepped in and helped usher AWAY toward
recovery. The ensuing rally ended in November when the company
provided weak earnings guidance. The 20-level provided a firm
backstop for AWAY, however, and, following a basing period during
the fourth quarter of 2012, AWAY was once again headed skyward.
Riding support at its 10-day and 25-day moving averages, the stock
was poised to challenge its IPO heading into February, and finally
eclipsed this technical hurdle in the wake of a strong
fourth-quarter performance. AWAY is now trading just shy of 30,
where it may enter a period of consolidation as it digests recent
gains. We recommend buying on weakness (suggested buy range 28-31)
and placing a stop loss near 27.
In the two weeks following that advice, AWAY traded calmly
between 30 and 31, building a short base. But last week it broke
out to new highs, after the company announced a strategic
partnership with travelmob, which has a leading presence in Asia
Pacific, and a bullish analyst note. So, you could step in and buy
now; the stock is strong! But even wiser would be to take a trial
Cabot Top Ten Trader
, to get Mike's latest advice on the stock.
Yours in pursuit of wisdom and wealth,
Cabot Stock of the Month