It’s a “deja vu” feeling in.. I am reopening the same trade that was done earlier this year and closed with a very nice return a week later. You would think that with a universe of over 40 tech stocks that I follow, I could come up with different pairings but apparently not so far. I don’t mind honestly. Tripadvisor (TRIP) is one of my favorite stocks as you saw in the latest Tech Stock Power Rankings and while it was even more attractive a few weeks ago, I still think it’s a great buy and AOL is in many ways a very easy stock to short.
Today, I decided to open a trade based on this concept. Let’s start off by looking at the numbers:
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Long TripAdvisor (TRIP)
I am getting slightly worried. If you remember well, at some point, I started worrying about having fallen for Google’s (GOOG) stock, I couldn’t see much downside about the company and thought it was such an incredible investment that I probably could have paired it off against almost any other stock. These days, Apple would be that stock but TripAdvisor is also right up there. To me, the lucrative online travel industry is quickly being taken over by TRIP. Have you booked any type of trip recently? If so, chances are that you spent some time on Tripadvisor.com getting feedback about a hotel, activity, restaurant, etc. It is that good and despite attempts by competitors, nothing comes close right now and the community is only making it stronger, in a similar way to Facebook.
Another great part is that TRIP is one of Facebook‘s partner making its relationship with the users deeper and stronger. I do think the company will continue to see significant opportunities and is a great investment going forward.
Short AOL (AOL)
Agreed, not much has changed for AOL since the start of the year, no good or bad news. AOL is scheduled to report earnings in a little less than 2 weeks which is pretty much as close as I could accept right now. With Google coming up short, I don’t see any particular reason that would justify great results by the company led by Tim Armstrong. The costs will continue to be very high and with the economy still being very shaky, I don’t think there is any way it could come out with breakout numbers. It will however be very interesting to see what type of news they can come out with and if they can define their strategy more clearly.
Disclosure: No positions on TRIP or AOL but this trade will be opened on Monday morning