We are on a roll aren’t we? After publishing our first two stock picks of the year on Monday (AAPL/NILE) and Tuesday (PCLN/IACI), yesterday we opened a trade on Dice Holdings (DHX) and Monster Worldwide (MWW). Today’s trade will remain a surprising one for many of you. Why? Because I have been very critical of Amazon in the past year, of its strategy regarding the Kindle. But as I much as I can talk about being Amazon CEO Jeff Bezos, the fact is that he is looking like a smarter executive every day. This trade is not between two comparable companies but rather between an undervalued company (Amazon) and an overvalued one (The Knot).
Before getting started, here are the main numbers that I used to decide on this trade:
Ticker Name Category Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Trend Analysis
AMZN Amazon.com Inc MERCHANDISE $179.65 2.08 73.12 39.88 34.26 27.88 4.08 14.25 100
KNOT Knot Inc/The CONTENT $9.92 (0.15) 140.71 47.58 -2.18 2.42 3.58 6.04 70
Both stocks have very strong scores for their trend analysis but Amazon’s (AMZN) perfect score of +100 gives it the edge
Long Amazon (AMZN)
Amazon is the leader in what of the emerging trends of this century, ecommerce. That has evolved over time but through a tested system and a distribution network like no other, the company has placed itself in the best possible spot. Acquiring Zappos was an incredible move and I think Jeff Bezos has got good things going. But what has truly been helping me believe that Amazon still had growth in it is how aggressive it has been with its mobile strategy. I am confident that Amazon can keep up a high growth rate in the short to medium term thanks to its Kindle but also its apps for the Iphone and Android.
Short TheKnot (KNOT)
If you take a look at TheKnot’s web traffic, you will see that things are not going very well for the wedding network. They have declining revenues, profits and are trading at a premium compared to almost any other company that we follow. I remain shocked that the Knot can keep its stock price so high with so little going for it. There have been acquisition rumors but nothing looks serious so far. Also, the Knot continues to compete for advertising dollars with so many other giants while Amazon faces less competition for its revenues.
Just take a look at the charts for both companies:
Disclosure: I do not hold positions on either stocks