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:
Ticker | Name | Price | PE Ratio | PE Next Year | Return YTD | Sales Growth | Analyst rating | Book Value | Beta | Revenue/Share | Sales 5Y Avg Growth | EPS 5Y Avg Growth |
---|---|---|---|---|---|---|---|---|---|---|---|---|
PCLN | priceline.com Inc | 1315.65 | 35.95 | 20.81 | 13.18 | 29.13 | 4.68 | 133.02 | 1.24 | 133.4 | 30.7 | 57 |
NILE | Blue Nile Inc | 34.9 | 41.06 | 27.03 | -25.89 | 12.49 | 3.73 | 3.17 | 1.07 | 35.89 | 11.55 | 13.14 |
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) data by YCharts
Long 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.
Next earnings release: May 9th 2014
Short 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.
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
Are you shorting your stock picks via puts??