What Do Hedge Funds Think of the Travel Industry?

Paul Reeder and Edward Shapiro of Par Capital Management had over 25% of their firm’s second quarter 13F invested in the online travel booking industry. Par Capital is a Boston-based private investment partnership that focuses mainly on travel and online media industries, and manages over $2.5 billion in assets.

Priceline.com Inc (NASDAQ:PCLN) was Par Capital’s top 2Q 13F holding, although the firm did downsize its position by 47% in the quarter. Priceline made up 11.5% of Par Capital’s 2Q 13F portfolio. Priceline is expected to increase its 2011 revenues by 19% in 2012 and 15% in 2013, reflecting anticipated market share gains and healthy volumes. It’s worth mentioning, though, that these positives are offset somewhat by economic uncertainties across the pond.

For the most part, however, international operations are expected to continue to drive growth. Over half of Priceline’s gross bookings come from abroad, fueled by past acquisitions of Active Hotels and Bookings B.V., providers of Internet hotel reservation services in Europe. This has enabled Priceline to become an overseas leader in online hotel reservations. Priceline fell off a cliff in August on earnings guidance, but has since rebounded over 10%, and still trades at a forward P/E of 17 versus its trailing P/E of 25.

LONE PINE CAPITAL

At the end of the second quarter Stephen Mandel of Lone Pine Capital held the most shares of any of the funds we track at over 1.1 million total. Priceline was also one of Lone Pine’s top five picks, while Conatus Capital also had Priceline as top five pick. Other top firms upping their shares or taking new stakes in Priceline were Tiger Global Management and Fisher Asset Management.

Expedia Inc (NASDAQ:EXPE) is expected to increase revenues 5% by the end 2012, though most estimates don’t accurately account for its December 2011 spin off of Tripadvisor Inc (NASDAQ:TRIP). Without Tripadvisor, the company will be negatively impacted by a reduced revenue mix and overexposure to Europe. As well, the company will have to increase advertising spending without Tripadvisor, though it does have the likes of its sister company Hotels.com, to use as leverage.

Expedia made up over 6% of Par Capital’s 13F portfolio; however JAT Capital Management owned over 1 million shares more than Par Capita. As well, Expedia was a new position for JAT and made up over 9% of their portfolio according to their 13F. It also appears that traders are bullish on Expedia based on options action. Par Capital had over 4.5% of its 13F invested in Tripadvisor, at around 3 million shares.

Orbitz Worldwide, Inc. (NYSE:OWW) announced an EPS of $0.04 for the second quarter, missing consensus estimates by one cent. Orbitz’s revenue was down 0.4% compared to the same quarter last year. Analysts expect that the company will post $0.17 EPS for the current fiscal year. At the end of 2Q, Par Capital was the most bullish fund in Orbitz, owning almost 25 million shares—almost 25% of Orbitz’s common stock outstanding. Other key managers owning Orbitz at the end of June were D.E. Shaw, Joel Greenblatt, Jim Simons and Steven Cohen.

The other big name in the online travel industry is Kayak Software Corp (NASDAQ:KYAK). The company made its public debut in July of this year with a stellar IPO; its shares are up almost 12% since. Kayak reported generally better second quarter results than most of its competitors, primarily due to its limited exposure to Europe (around 20%).

The P/E and P/S ratios for Par Capital’s other three holdings shows that Expedia currently trades at the greatest discount amongst the travel service companies—at 21x earnings and 1.9x sales—while Tripadvisor trades a P/E of 26x and a P/S of 6.9x. Priceline is similarly valued, at a P/E of 26x and a P/S of 6.4x. While Kayak trades at an outsized P/E of 52, its P/S ratio comes in below Tripadvisor and Priceline at 5.1. In terms of market share, Expedia has a decent hold on the U.S. travel website market, with Priceline and Orbitz battling for second. Despite being down significantly year to date, Orbitz appears to have many headwinds on the horizon, and is more attractively valued than the majority of its peers.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!