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:
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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