Two Stocks Go Private

In Peter Lynch’s “One Up On Wall Street,” he said that he first heard about La Quinta (LQI), when has asked someone at rival Holiday Inn who their best competitor was. Lynch, who was then the manager of Fidelity Magellan, later found out that La Quinta was covered by just three analysts. His point is that some of his best investment ideas didn’t come from highly paid research analysts. He wrote:

If IBM goes bad and you bought it, the clients and bosses will ask: “What’s wrong with that damn IBM lately?” But if La Quinta Motor Inns goes bad, they’ll ask: “What’s wrong with you?”

That’s very true. Later, Lynch spent a few nights at La Quinta; he liked what he saw and bought the stock. It became a huge winner for the fund. Today, La Quinta announced that it’s going private. The Blackstone Group is buying it out for $3.4 billion.
What’s strange is that this is the second private equity deal in the last two days. Yesterday, Linens N Things (LIN) said it’s being bought out for $1.3 billion. Doesn’t anybody like the stock market anymore? Yes, I know there have been some dubious IPOs in the past, but I’m curious if going private is a trend.

Posted by on November 9th, 2005 at 9:59 am


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