I’m still far from my 7 live positions and while I continue to work on this, I ended up closing 2 trades on Friday morning so I guess I’ll have to wait a bit longer. I can’t complain though as returns have been very solid so far and while the year is still (very) young, I will appreciate it while it lasts.
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 | Sales Growth | Analyst rating | Book Value | Revenue/Share | Sales 5Y Avg Growth | EPS 5Y Avg Growth | Sales 5Y Avg Growth | EPS 5Y Avg Growth |
---|---|---|---|---|---|---|---|---|---|---|---|---|
ADBE | Adobe Systems Inc | 68.34 | 115.16 | 32.83 | -7.91 | 3.96 | 13.55 | 8.09 | 4.11 | N/A | 4.11 | N/A |
TRIP | TripAdvisor Inc | 91.25 | 65.46 | 34.01 | 23.81 | 3.54 | 6.08 | 6.61 | N/A | N/A | N/A | N/A |
It could seem pointless to look at 5 year numbers when one of the stocks turned public just last year but I think it’s important to see how poorly Adobe is fairing in this new era of software so having these 2 companies trading at nearly the same forward P/E seems like a no-brainer for me, don’t you think?
TRIP Revenue (Quarterly YoY Growth) data by YCharts
Long TripAdvisor (TRIP)
Last week, I got a very good question about one of my recent trades. Specially, why I had picked Priceline (PCLN) instead of TRIP even though TRIP is clearly a superior stock in my 2014 Power Rankings? I explained why but as TRIP announced its results, I can’t help but feel like I missed on an opportunity. Why buy a stock now that I could have gotten 10% cheaper just a few days ago? I guess there are 2 main reasons. First is that this one fits very well in a trade vs ADBE as they have very close P/E’s. The second is that TRIP impressed me not only because of their numbers but also the earnings call. I continue to be a strong believer in what they’re doing, their very long term vision and I guess you could argue that TRIP is building its own ecosystem which is very impressive. Its target audience is a few billion travelers and a few million travel-related businesses (hotels, resorts, etc), not bad right? I will be without a doubt be writing more about TRIP but for now I’ll simply say that it is a buy at these levels.
Next earnings release: May 2nd 2014
Short Adobe (ADBE)
Adobe’s stock has done very well in the past year. That is despite declining revenues and profits but also product screw ups (security issues), a lacking strategy and many different questions regarding its futures. It does still have amazing products but those are facing stiff competition and I don’t see what could possibly justify its current valuation. To give you an idea, in its last 4 quarters, ADBE’s top diluted earnings per share were $0.16. In the previous 6 quarters, the worst performance was $0.37…!
Next earnings release: March 18 2014
Disclaimer: No positions on TripAdvisor (TRIP) or Adobe (ADBE) but I will initiate the trade on the open today
What were the most interesting things from the conference call? Can you sum it up, or link to a summarized version?
Thanks!
@Johan – Ha…! How to summarize! Can you give me a week? I’ll try to write a post about TRIP very soon giving more details about my thoughts, etc.
Ok thanks! I tried to search the web for some analysis from the CC but without luck.
I’m a little bit reluctant to short ADBE since they might be an alternative case to the 3D printing business. This in contrast to 3D Systems (DDD) which I currently short because of the hype and competition.