Posts Tagged ‘PCLN’

Closing 2 trades and a look back on the two remaining live ones

By: ispeculatornew | Date posted: 02.18.2010 (5:00 am)

It is now time to close 2 trades, one that went badly and the other which went better than I could have hoped. I will start with the good one!

LONG NFLX/SHORT NILE

Blue Nile is a difficult stock to short because it is very volatile and trades at very high P/E’s compared to its peers (in my opinion). While I like the company and think it does have a very good future, its high ratios continue to shock me. I had gone short against Netflix, who announced very good earnings as well as a few more partnerships. This was the best example of a long/short trade that went for the best as Netflix gained 26.61% while Blue Nile lost 17.51% of its value for a total gain of 63.04%***

***As explained in the past, when you do long/short trades, you actually put up margin only, no capital and so returns are divided by .7 to account for the fact that 10,000$ portfolio would not have 10,000$ short and 10,000$ long but rather 14,000$ long and 14,000$ short.


LONG GOOG/SHORT BIDU

I knew that shorting Baidu was a risky proposition but simply believed it was also an overvalued stock at this point. I did turn out to be wrong. Google did remain steady (-2.19%) but Baidu gained (-15,82%) enough to make me a loser on this trade, a loss of 24.79%.


The other two trades that I currently have are both going fairly well so far:

LONG PCLN/SHORT EXPE +9,64%

LONG AAPL/SHORT AMZN +8,67%

So far this year, it gives me an average return per trade of 14.14%, well above expectations. Remember that I was quite happy last year with the 2,53% return I had given the short time the average trade lasts. I should have a new trade next Monday, hoping that they can continue to do well!

Internet stocks play (Blue Nile vs Priceline)

By: ispeculatornew | Date posted: 12.17.2008 (4:00 am)


In the current environment, even a tech stock can be very different from one to another. An interesting way to look at things is through Priceline.com(PCLN) and Blue Nile.com (NILE). You might have heard of both but in case I will give you a brief description.

Priceline.com is a travel comparison website that offers the possibility of getting very cheap deals on a variety of travel needs, mainly hotels and plane tickets but even cars, cruises, vacations. Their main objective, above anything else is to beat prices by any competitor. They do have some competition by search engines such as Kayak.com but have generally been able to live up to their promise of providing the cheapest holiday.

Blue Nile is a company that has perhaps had even more of an impact in its industry. It is a rather high end jeweler that is completely online. Its impact has been even more dramatic than for example the impact of Dell on the pc industry. That is because gross margins in the industry are very important to cover for all the costs of stores, employees, etc, etc. Blue Nile has thus been able to get higher margins than competitors while giving their customers much better pricing.

The contrast is very interesting of course in that Priceline is perfectly suited for visitors that are looking to save on their vacations while Blue Nile is targeting those who are looking at making an expensive gift or perhaps even securing the woman of their dreams by buying an engagement ring. And while a diamond is forever and love for life does not have a price, the diamond you buy does have one.

And in this environment of uncertainty and tough economic conditions, you would think that there might be a lot more of growth in the company that is helping its clients save money. It is not a random fact that Walmart (WMT) has been one of the best performing companies in this tough environement and you would think that Priceline could profit as well. Sure, not as many people are going on vacations, but I still think that over the short to medium term, Priceline will have a much better growth story than Blue Nile.

So it was a big surprise for me to see that Blue Nile is actually trading at a higher P/E ratio (27) than Priceline (17). In the past year, the story has been a complete opposite as Blue Nile has seen both its sales and profit fall by close to 50% while Priceline has enjoyed a 50% increase in revenues and almost 100% in Gross profits.

I would thus argue that I would go long Priceline(PCLN) vs short Blue Nile(NILE) but only for a few months until the valuations make more sense or until their P/E ratios move closer to each other.