After being able to close out our trade on Long WebMD (WBMD) & Short IAC Interactive (IACI) last week, it meant that I would be able to open a new trade which was obviously very good news. It was a surprise to see the most recent trade turn to out successful so quickly but given KNOT’s volatility, things can indeed go very quickly. Things continue to go very well for us so far this week, better than we could honestly expect or hope for as our average trade has returned 12.99% so far this year translating into an annualized returned over 100%. Our objectives are much more modest and since in both of the previous years we had our best results at the start of the year, we can only work on doing better this year.
Today, we are opening a new trade and while the names and sides are common, pairing them up together is now. I have consistently been bearish about Monster Worldwide (MWW) but would usually trade it against Dice Holdings (DHX), a similar name. The trade does not look as good this time around. In a similar way, I tend to go long Priceline (PCLN) against other internet travel companies but not this time around. Surprisingly, you will notice that these two companies trade at almost identical forward P/E ratios. Before going further, let me show you the main numbers I was looking at:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value
PCLN Priceline.com Inc 543.95 11 50.41 21.99 32.99 31.93 4.6 36.9
MWW Monster Worldwide Inc 17.73 -0.27 N/A 22.56 (26.28) 0.99 3.44 9.32
Analysts have been underestimating Priceline’s growth potential for years now and despite the chart that you can see, I still believe that Priceline has a lot more growth left in it. The company has been in some regards the performing dot com stock for years now and its sales growth of over 30% makes its P/E ratio look very cheap in my opinion. The company continues to face very solid competition in internet travel industry and while I do fear to some extent the traffic numbers reported by compete (at the bottom of this post), I do still consider that the company has a lot of growth left. Competitors such as Travelzoo are proving to be much better competition than expected but Priceline remains the top brand in travel and as long as it can keep up the premier service, I’m not worried. We did trade Priceline successfully earlier this year, hopefully things will go as well this time around.
Monster is one of those companies along with Blue Nile that always seems to be trading at a premium without much justification behind it. I did short it earlier against Dice Holdings in what is my preferable trade because both are in the same industry (online job postings) and while DHX usually maintains a higher growth rate, its P/E ratio has often been much smaller.. it made no sense and provided great trading opportunities. But not this time around. Still, Monster faces increasing competition and the upcoming IPO from LinkedIn will only make things more difficult. The company has been posting flat growth and I don’t see any logical reason behind a P/E ratio over 20.
Disclosure: No positions on Priceline (PCLN) or Monster Worldwide (MWW)