New Trade: Long Priceline ($PCLN) & Short Expedia ($EXPE)

By: IS
Date posted: 02.05.2016 (3:00 am) | Write a Comment

This morning I will be opening my 4th long and short trade of the year. Despite starting later than usual, it does look like I will be able to have all of the funds invested very shortly (which happens when I have 7 live trades). As is always the case you can see the existing live trades here:

http://www.intelligentspeculator.net/livetrades

Today’s trade is one between two very different online brands that do trade at very comparable P/E ratios. I strongly considered doing a PCLN-FIT trade but ended up changing not because I’m optimistic about Fitbit’s long term prospects but I’d be very worried about shorting the stock ahead of its Q4 quarterly results which could include very large holiday sales. So instead I’ve decided to do a PCLN-EXPE trade which I’m pretty sure I’ve done in the past.  Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNPriceline Group Inc/The1069.121.615.54-17.7124.274.34169.931.13161.4125.9741.93
EXPEExpedia Inc99.933.9717.52-22.5320.84.1118.81.1244.7114.6114.5

And the chart that I always look at when doing these trade, the quarterly y/y sales growth:

EXPE_PCLN_chart

$PCLNLong Priceline (PCLN)

Priceline is a star in every single way and has been able to extend its lead as the dominant online travel player (especially in the US). As you know, I’m a big believer in TripAdvisor (TRIP) but it was certainly telling to see TRIP’s stock jump so much when it announced that PCLN would be using its instant booking platform. TRIP has been able to sustain high growth in all meaningful metrics for over a decade now and I see no signs of that stopping. Priceline has several very strong brands (Priceline, Booking.com, Kayak, Agoda, RentalCars.com and OpenTable) and continues to be smart in managing its assets.

I usually add a 1 year chart for stocks here but I just wanted to give you a perspective of how Priceline has performed, here is a 10 year chart with PCLN compared to the S&P500 (SPY) and Nasdaq-100 (QQQ):

EXPE_PCLN_SPY_QQQ_chart

Next earnings: February 17th 2016

$EXPEShort Expedia (EXPE)

I am actually not that negative about Expedia and I think that in a world where very few names will likely do well, Expedia will certainly be part of that select group. That being said, I do not see a reason to think that Expedia can justify a higher P/E valuation than Priceline given its history

trends_pcln_expe

Credit: Google Trends

EXPE_PCLN_chart (1)

Next earnings: February 10th

Disclaimer: This trade on PYPL-RAX will be done on today’s opening.

New trade: Long Paypal ($PYPL) & Short Rackspace ($RAX)

By: IS
Date posted: 02.03.2016 (3:00 am) | Write a Comment

Today marks my third long & short trade of the year, so far things have been going ok. To start off, all of my long & short trades are always available (for 2016 but also past years) here:

http://www.intelligentspeculator.net/livetrades

I’m opening a new trade between two stocks that face intense competition partially from the “ecosystem” plays. I strongly believe that one will perform much better at least in the short to medium term.Here is the usual chart that I look at with sales growth over the past few quarters:
***Paypal was part of eBAY until a few months ago so I did add EBAY in this chart:
PYPL_RAX_EBAY_chart (1)

I would say that both have seen comparable growth in sales but as I’ll argue below, I think that makes PYPL a much more attractive stock for a comparable valuation.

Let’s take a look at the numbers:
TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PYPLPayPal Holdings Inc36.8336.0821.082.4315.2411.24N/A7.57N/AN/A
RAXRackspace Hosting Inc19.822.5421.36-18.0916.917.791.1612.6420.8330.89

$PYPLLong Paypal (PYPL)

Paypal is under intense competitive pressure from both giants like Google (GOOG) and Apple (AAPL) but also much more nimble private companies such as Stripe. Clearly, I’m worried about it’s longer term future. But payments are incredibly complex and I do think Paypal will remain the dominant player in the short to medium term. It has also made some acquisitions that at least give it a shot in the future. Growth is clearly slowing but I think it remains a good value at these levels compared to the overall market. Paypal remains the dominant option for peer-to-peer payments and does have a solid infrastructure to manage B2C business (nearly) all around the world
PYPL_RAX_EBAY_chart (2)
pypl
Next earnings: April 28th 2016

Short Rackspace (RAX)

Rackspace is a more difficult name to trade but I do remain confident that Rackspace will greatly struggle to compete with the likes of Amazon (AMZN), Microsoft (MSFT), Google (GOOG) and so many others. There is intense competition in cloud services that are resulting in significant price cuts which end up having an important impact on the stock that I expect will continue. Rackspace can certainly exist and continue to grow but I’m confident that margins will be under heavy pressure.
PYPL_RAX_EBAY_chart (4)
Next earnings: February 16th 2016
Disclaimer: This trade on PYPL-RAX will be done on today’s opening.

New Trade: Long Apple ($AAPL) & Short Monster Worldwide ($MWW)

By: IS
Date posted: 01.28.2016 (5:02 am) | Write a Comment

Today marks the second long & short trade of the year and this one will also not come as a surprise to regular readers. To start off, all of my long & short trades are always available (for 2016 but also past years) here:

http://www.intelligentspeculator.net/livetrades

Yesterday started off very well as I bought Tripadvisor (which was knocked down by a Goldman Sachs downgrade). To be honest, that’s not a big source of concern although I will try to get my hands on that report and certainly get back to you with more thoughts. The impact though was TRIP starting off with a much lower starting point.

First off, here are the numbers for both names:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthBook ValueRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
MWWMonster Worldwide Inc4.88230.318.5-13.96-4.654.788.75-5.83N/A
AAPLApple Inc93.4210.69.8-5.0127.8623.1340.6225.5634.76

And here is the growth in revenues for both in the past few quarters:

AAPL_MWW_chart

It’s easy to get negative about Apple, but I think that almost any number of chart will speak for itself here. First off let’s compare both:

$AAPLLong Apple (AAPL)

No surprise here is I’ve been very vocal in my belief in the Apple stock for years so when one of the ecosystem plays comes down, it’s always tempting to add to my already existing significant position. For today though, I just want to focus on the fact that a lot of the negativity in recent days is focused on the growth story being over for Apple with many warning of a first decline in the number of iPhones sold. That is a fact and not one I’d argue, but it’s also a fact that year had an extraordinary 1 year-bump coming from the long anticipated introduction of larger screens. That made this year an “impossible” comparable. I do think the long term growth story is still very much alive and others such as Ben Thompson agree. Apple remains the dominant smartphone ecosystem not in terms of number of users but in terms of revenues for developers (that lead is not declining), of valuable traffic (which is why Google is paying Apple $1B to remain the default search engine) so I do think that Apple is a very good value at these levels.

AAPL_MWW_chart (1)

Next earnings: April 25th

$MWWShort Monster Worldwide

In many ways, Monster is a company that has struggled to adapt to Web 3.0 and to competition such as LinkedIn (LNKD), Indeed and more targetted offerings such as Dice Holdings. There has been very little innovation and for that reason, the stock has underperformed. It is unfortunately coming down to levels that will make it more difficult to short but for now, it’s a good option for me. There is obviously very little in common between Apple and Monster but this is a case of trading 2 stocks that are trading at almost identical forward P/E ratios.

AAPL_MWW_chart (2)

Next earnings: Feb 11th

Disclaimer: Long Apple (AAPL) and I will be opening this trade on today’s opening.

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New Trade: Long TripAdvisor (TRIP) & Short Blue Nile (NILE)

By: IS
Date posted: 01.27.2016 (3:00 am) | Write a Comment

Today marks the first long & short trade of the year and this one will not come as a surprise to regular readers. To start off, all of my long & short trades are always available (for 2016 but also past years) here:

http://www.intelligentspeculator.net/livetrades

This week, I had more issues finding the ideal trade partially because most if not all of my names are reporting earnings in the next 2-3 weeks. That being said, I’m confident that the potential upside/downside ratio on this trade is very good and that this will be a good start to my 2016 trading.

First off, here are the numbers for both names:

data

And here is the growth in revenues for both in the past few quarters:

NILE_TRIP_chart

Another interesting thing I found is when I looked at search interest from Google trends for both brands. First off let’s compare both:

TRIPNILE

Ah, normal I guess right? One generates so much more interest and completely dominates its niche. So let’s take a closer look at NILE by itself:

NILE

Ouch.. so not only is sales growth weak for NILE but visitors are searching for it less over time? Not a good sign to be sure.

$TRIPLong TripAdvisor (TRIP)

TripAdvisor is one of the 3 tech names that I hold in more significant size (with AAPL and FB) so it’s not a big surprise to see it as my earliest picks to start the year. The stock has had its fare of tough days and even financials have not been growing as quickly as I was hoping for but I do till strongly believe in the brand and think it has continues to increase its lead over all challengers. The fact that it signed Mariott and Priceline among partners for its instant booking initiative also speaks volumes. I do think TRIP is a long term hold and I can’t imagine it justifying an identical valuation (in terms of forward P/E) to NILE.

Next earnings: Feb 11th

NILE_TRIP_chart (1)

$NILE

Short Blue Nile (NILE)

Blue Nile has probably been the stock I’ve shorted the most since writing on this blog. Why? It has consistently been priced too high if you take into account its past, current and future expected growth. NILE has been able to escape competing (for the most part) with Amazon but does remain in a very tricky space with very little growth, a difficult market to target and customers that for the most part are one time buyers. I simply do not see how NILE can justify the same valuation as TRIP.

Next earnings: Feb 9th

NILE_TRIP_chart (2)

Disclaimer: Long Tripadvisor (TRIP)

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My 2015 Long & Short Tech Stock Picks

By: IS
Date posted: 01.26.2016 (3:00 am) | Write a Comment

$msftGood morning:) I know it’s been a long time but I’m hopefully back for good now:) As i had mentioned I did close the remaining long & short trades on December 31st, concluding a year that was very poor. Yes, the portfolio did decently compared to the market but given this is a long & short portfolio, the expected return for me is closer to the 5-10% range. These were the trades that I closed on December 31st:

Long Microsoft (MSFT) & Short Adobe (ADBE)

MSFT_ADBE_chart

Long Twitter (TWTR) and short Yahoo (YHOO)

TWTR_YHOO_chart

Long Facebook (FB) and short eBay (EBAY)

FB_EBAY_chart

Long Expedia (EXPE) and short Blue Nile (NILE)

EXPE_NILE_chart

I will not spend too much time commenting those. The clearly bad one was going long Twitter which did not go well in terms of timing. In addition, with holidays I did end up closing this trade lower than I should have.

What’s Next:

There’s a lot on my plate for the coming days & weeks:
-Open 7 new long & short techno trades
-write a few updates regarding my views on some of those names
-Update the list of stocks I follow
-Work on the blog (it’s insanely slow.. I appreciate the patience in getting this fixed)

I hope all of you are doing well, expect more writing in the coming weeks!

thanks again!

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One Way To Play The Current Market Crisis

By: IS
Date posted: 01.21.2016 (6:44 am) | Write a Comment

$MCDFair to say that the market has made things interesting to start 2016 and there are certainly real concerns about not only the market but the fundamentals involved for these companies especially with the prices of commodities, impact of China, etc. When crisis strikes, great opportunities rise as the number of investors making “irrational” moves increases. This seems to be a great time to find bargain stocks and finding a quality dividend stock at 20-30% less than its price from a few weeks ago is certainly very attractive.

I personally think one potentially interesting way to play this is to look at consumer cyclicals sector where I personally noticed quite a few stocks that are trading at significant dividend yields.

You will notice that there are several very known names in there including:

Staples (SPLS)
Ford Motor (F)
General Motors (GM)
Six Flags Entertainment (SIX)
Macy’s (M)
Viacom (VIA)
Darden Restaurants (DRI)
Best Buy Co (BBY)
Nordstrom (JWN)
Toyota Motor (TM)
Abercrombie & Fitch (ANF)
McDonald’s (MCD)

I’d personally likely go for the clothing and restaurant names rather than media for example where there is a deep transformation going on. These are mostly offline companies but for online shopping consumers could head to http://www.cost.co.uk for example. I’d stay away from companies (such as Best Buy and Staples) that are directly competing with online giants as it’s unclear how that future will play out. Why? My main concern is that there are many industries that are being drastically changed by the technology sector. When you think about shopping for electronics, books, media, transportation and so many more, you can think about the “traditional” players and how quickly their world is being transformed. Best Buy, Barnes & Nobles, traditional media companies and taxis are facing a very uncertain future and while it’s easy to say they should adapt to this new reality, that is far from easy. Many have failed and are out of business while others like the New York Times are adapting as fast as they can to survive in this new world.

Another factor to consider when buying is the impact of a very strong dollar. An international presence is always a positive and provides additional diversification but I would say a strong US presence isn’t terrible these days either and will offer less resistance when converting those revenues (and profits) back to US dollars. Just look at this 3 year chart for US dollar index and you’ll see what I mean. This explains why so many companies are reporting currency impact as a major negative in their earnings.

DXY

While online shopping for clothing and food delivery is certainly growing and happening, I’d say we seem much further away from companies such as Macy’s being disrupted.

Do you hold any of these names? Here is the full list:

SymbolNameIndustryDividend Yield (TTM)
IGTInternational Game TechGambling8.8
PSOPearsonPublishing7.94
LVSLas Vegas SandsResorts & Casinos6.71
GEFGreifPackaging & Containers6.33
FUNCedar FairLeisure6.05
MATMattelLeisure5.92
GMEGameStopSpecialty Retail5.62
TIMETimePublishing5.5
TUPTupperware BrandsPackaging & Containers5.42
SPLSStaplesSpecialty Retail5.32
GESGuess?Apparel Stores5.16
WYNNWynn ResortsResorts & Casinos5.14
RGCRegal EntertainmentMedia - Diversified5.04
FFord MotorAuto Manufacturers5.01
SEASSeaWorld EntertainmentLeisure4.8
GMGeneral MotorsAuto Manufacturers4.67
MDPMeredithPublishing4.63
MDCM D C HoldingsResidential Construction4.61
IPInternational PaperPackaging & Containers4.5
SIXSix Flags EntertainmentLeisure4.44
DINDineEquityRestaurants4.31
COHCoachLuxury Goods4.3
GPSGapApparel Stores3.96
VIABViacomMedia - Diversified3.84
AMCAMC Entertainment HldgsMedia - Diversified3.82
TRIThomson ReutersPublishing3.81
PKGPackaging of AmericaPackaging & Containers3.76
KSSKohl'sDepartment Stores3.74
MMacy'sDepartment Stores3.68
VIAViacomMedia - Diversified3.61
SONSonoco ProductsPackaging & Containers3.59
DRIDarden RestaurantsRestaurants3.57
AEOAmerican Eagle OutfittersApparel Stores3.49
DSWDSWApparel Stores3.48
CBRLCracker Barrel OldRestaurants3.48
BKEBuckleApparel Stores3.46
WRKWestRockPackaging & Containers3.4
BBYBest Buy CoSpecialty Retail3.39
CNKCinemark HoldingsMedia - Diversified3.29
JWNNordstromDepartment Stores3.26
LEGLeggett & PlattHome Furnishings & Fixtures3.26
TMToyota MotorAuto Manufacturers3.23
CATOCatoApparel Stores3.22
KARKAR Auction ServicesSpecialty Retail3.2
GPCGenuine PartsSpecialty Retail3.14
ANFAbercrombie & FitchApparel Stores3.13
JCIJohnson ControlsAuto Parts3.08
HOGHarley-DavidsonRecreational Vehicles3.07
CHSChico's FASApparel Stores3.06
MCDMcDonald'sRestaurants2.99
HSNIHSNSpecialty Retail2.95
OMCOmnicom GroupAdvertising Agencies2.87
JW.BJohn Wiley & SonsPublishing2.87
WWEWorld Wrestling EnterMedia - Diversified2.86
JW.AJohn Wiley & SonsPublishing2.85
TGNATegnaBroadcasting - TV2.83
PAGPenske Automotive GroupAuto & Truck Dealerships2.8
RENXRELXPublishing2.8
DNKNDunkin Brands GroupRestaurants2.8
MINIMobile MiniPackaging & Containers2.74
WSMWilliams-SonomaSpecialty Retail2.74
PIIPolaris IndustriesRecreational Vehicles2.68
TVPTTravelport WorldwideLeisure2.66
MGAMagna InternationalAuto Parts2.62
LUXLuxottica GroupApparel Stores2.61
YUMYum BrandsRestaurants2.59
ALSNAllison TransmissionAuto Parts2.57
WYNWyndham WorldwideLodging2.57
BMSBemis CoPackaging & Containers2.54
EATBrinker InternationalRestaurants2.53
HASHasbroLeisure2.51
HRBH&R BlockPersonal Services2.51
HOTStarwood Hotels & ResortsLodging2.51
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