New Trade: Long WebMD (WBMD) & Short The Knot (KNOT)

By: ispeculatornew
Date posted: 04.05.2011 (4:00 am) | Write a Comment  (1 Comment)

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After being able to close out the trade on Priceline (PCLN) and IAC Interactive (IACI) last week, it meant that I would be able to open a new trade which was obviously very good news. I will try to enjoy the moment because the current 4 live trades have been very steady. They are all in positive territory but none of them is over 5% as of right now and nothing leads me to believe that I will be able to close them out very soon. Oh well… as long as they do well, I’m prepared to be patient. After all, the average trade has returned a remarkable 11,40% so far this year, well above our objectives.

This time around, the long/short trade features two somewhat similar companies; WebMD (WBMD) & The Knot (KNOT), two content companies that are very specific in their targets which I like much more than the “do it all” model of AOL (AOL), IAC Interactive (IACI) or Yahoo (YHOO). That being said, The Knot is one of those companies (much like Blue Nile) that I do not understand its valuation very well and it often seems like a good short target. Before going further, let me show you the main numbers I was looking at:

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Long WebMD (WBMD)

The health/medical internet company is certainly in a great sector that is become increasingly important to its users. Despite some challenges from Google Health and a few others, WebMD has remained a strong leader. That being said, I was surprised to see how weak the traffic growth had been according to Alexa (as you can see below). However, the advertising opportunities remain important in an industry that revolves around so much money and I do expect WebMD to keep up the growth making its valuation very acceptable.

Short The Knot (KNOT)

While The Knot (KNOT) is also in an attractive segment (weddings), its growth has not been up to expectations, especially when you consider the very high P/E ratio that this company continually commands. It makes no sense to me. Sales have not been growing very fast and analysts are not very bullish on The Knot either. One notable fact is the book value that is worh more than half of the stock and the company has almost no debt. Another concern that I have in shorting KNOT is that it is a thinly traded stock compared to others here and thus can move very quickly.

Disclosure: No positions on WebMD or The Knot

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1 Comment

  1. […] for the first time in a few weeks, we will be able to close out a trade, specially, our trade on WebMD (WBMD) and The Knot (KNOT) which is actually our most recent one and currently stands at +20,88% so I will be closing it out […]

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