New Trade: Long Priceline ($PCLN) & Short Blue Nile ($NILE)

By: ispeculatornew
Date posted: 02.24.2014 (5:10 am) | Write a Comment  (1 Comment)

      Post a Comment

Things continue to go well so far for these long & short stock picks as the average trade has returned nearly 10% so far this year. Hopefully this keeps up!

As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:

http://www.intelligentspeculator.net/livetrades

You can see the numbers for both companies involved in today’s trade here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNpriceline.com Inc1315.6535.9520.8113.1829.134.68133.021.24133.430.757
NILEBlue Nile Inc34.941.0627.03-25.8912.493.733.171.0735.8911.5513.14

A few years ago, shorting Blue Nile was a no-brainer but it’s not as clear now. Why? It’s a combination of poor stock performance and slightly higher growth from the company. Still, NILE is far behind PCLN in terms of growth.

PCLN Revenue (Quarterly YoY Growth) Chart

PCLN Revenue (Quarterly YoY Growth) data by YCharts

pclnLong Priceline (PCLN)

It’s my second trade on Priceline this year and it’s been a great company to own for several years now. You’d think that as PCLN grows, keeping up the growth would be an incredible challenge but the reality is that PCLN has incredibly solid brands in its portfolio and has been able to justify its valuation for almost a decade now. The fact that is trading at a comparable forward P/E ratio to Blue Nile which doesn’t have to justify it makes this train a no-brainer. I did go through the latest earnings release and the earnings call transcript and generally liked what I saw.

PCLN

Next earnings release: May 9th 2014

003_blue_nileShort Blue Nile (NILE

Blue Nile used to trade at insane valuations but it’s now basically where it was 5 years ago which has translated into very poor returns for shareholders. The company’s fundamentals do look now so it’s no longer the obvious short. That being said, trading at a 27 P/E doesn’t make sense to me. NILE is a leader in its category but still faces decent competition even online making it difficult to grow as quickly as they’d need.

NILE

Next earnings release: May 2 2014

Disclaimer: No positions on Priceline (PCLN) or Blue Nile (NILE) but I will initiate the trade on the open today

If you liked this post, you can consider subscribing to our free newsletters here


1 Comment

  1. Comment by IS — February 26, 2014 @ 11:04 am

    Are you shorting your stock picks via puts??

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.