Wow, the last long & short tech stock for the year today as I no longer trade late in the year as I also did last year. Clearly, 2012′s final returns won’t be anywhere near what I was expecting or what had been achieved in the past 2 years. I’ll certainly write more about what went right and wrong in the next few weeks and will obviously be monitoring the 7 open trades to close them out when they’ll reach their stop gain or losses.
Let’s get right to it and look at the numbers:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Beta
OPEN OpenTable Inc 43.52 0.92 47.57 22.73 11.83 40.94 3.8 5.92 1.32
NILE Blue Nile Inc 37.03 0.8 67.78 34.97 (8.81) 4.54 2.82 2.33 1.33
Long OpenTable (OPEN)
Going long OpenTable certainly feels a bit odd, it’s been trading at sky high P/E ratios and I’ve been very reluctant to go long even though the company continues to expand. There have been rumors that it would face a lot more competition from players such as Google but up to now, OpenTable has remained a leader and growth has remained very strong. Margins might come down a bit but I still think it’s a no-brainer considering its trading at a comparable P/E ratio as NILE.
Short Blue Nile (NILE)
It wasn’t by luck that I had Blue Nile at the last possible position in my 2012 Tech Stock Power Rankings. Despite spending a lot of time on this, I still remain unable to understand how NILE continues to trade at such a high P/E ratio despite no growth, low margins and very few encouraging signs. I really have to meet one of their shareholders at one point so they can explain what I’m missing here. I’ve gone short over and over on NILE with a lot of success. Getting burned is part of the game from time to time but this one has been a rather consistent play for me.
Disclosure: No positions on OpenTable (OPEN) or Blue Nile (NILE), this trade will be opened on Monday morning