Numerous leisure and travel-related stocks have enjoyed a steep uptrend over the past several years, as consumer confidence has strengthened greatly in the aftermath of the financial crisis. In that vein, the November 13 terrorist attacks in Paris did little to impede global travel, while nonetheless representing a terrible reminder of what travelers could face when booking trips to distant locales. Nonetheless, the U.S travel industry is anticipated to continue its growth cycle in 2016, thanks to the still-improving labor market. The national unemployment rate continues to trend downward, recently reaching a multi-year low of 4.9%. The fast-mounting worries about the global economy overall and the strengthening of the U.S dollar might represent are some short-term challenges faced by international travelers, but the medium- and long-term picture of the travel industry looks quite bright given millennials’ steadily-increasing demand for travel. Having said that, this article will discuss the smart money sentiment towards one travel stock, Expedia Inc (NASDAQ:EXPE).
Is Expedia Inc (NASDAQ:EXPE) ready to rally soon? Hedge funds are becoming more confident of this scenario. The number of long hedge fund positions moved up by 11 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Nielsen Hldg NV (NYSE:NLSN), Vale SA (ADR) (NYSE:VALE), and Energy Transfer Partners LP (NYSE:ETP) to gather more data points.
Follow Expedia Group Inc. (NASDAQ:EXPE)
Follow Expedia Group Inc. (NASDAQ:EXPE)
In the 21st century investor’s toolkit there are tons of metrics investors use to size up stocks. Two of the most under-the-radar metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best money managers can trounce the broader indices by a superb amount (see the details here).
The online travel company has been very successful in growing its business over the past several years through an expansion of its portfolio of travel brands, which includes Expedia.com, Hotels.com, Hotwire.com, to name just a few. Although Expedia Inc (NASDAQ:EXPE) is one of the largest online travel companies in the world, its gross bookings account for only 4% of worldwide travel spending. Fresh statistics reveal that global travel spending stood at $1.3 trillion in 2015 and that the portion of bookings made through online channels has been trending up over the past few years. Considering the strong shift towards online bookings, Expedia appears to be in a strong position to grow its business in the upcoming years. One important feature of Expedia’s operations is that each of its technology platforms is operated by separate technology teams, which drives innovation, despite the fact that these technology teams and platforms are competing with each other in one way or another.
Keeping this in mind, let’s take a peek at the new action surrounding Expedia Inc (NASDAQ:EXPE), as well as discuss the company’s recent financial performance.
Let’s now take a look at Expedia Inc (NASDAQ:EXPE)’s performance over the past several years. The online travel company generated revenue of $6.67 billion in 2015, up from $5.76 billion in 2014 and $4.77 billion in 2013. The company’s bottom-line results have also been improving over the past few years, with 2015 net income increasing to $722.75 million, up from $372.95 million in 2014 and $216.36 million in 2013. The fast-increasing usage of the internet globally has stimulated the exceptional growth in the online penetration of travel bookings. For instance, Expedia Inc (NASDAQ:EXPE)’s gross bookings reached $60.83 billion in 2015, significantly above the $50.45 billion registered in 2014 and the $39.44 billion in 2013. The increase in worldwide gross bookings was mainly driven by the strong performance of Brand Expedia and Hotels.com, as well as new acquisitions. Nonetheless, the company’s revenue margin has been trending downwards in the past few years due to lower revenue per room night. The revenue margin declined to 11.0% in 2015 from $11.4% in 2014 and 12.1% in 2013.
What have hedge funds been doing with Expedia Inc (NASDAQ:EXPE)?
At Q4’s end, a total of 73 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 18% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the most valuable position in Expedia Inc (NASDAQ:EXPE), worth close to $471.5 million, corresponding to 8.7% of its total 13F portfolio. The second most bullish fund manager is Altimeter Capital Management, led by Brad Gerstner, holding a $379 million position; 20.8% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism contain Philippe Laffont’s Coatue Management, Israel Englander’s Millennium Management, and D.E. Shaw & Co. L.P., founded by David E. Shaw.
Consequently, key hedge funds have been driving this bullishness. Calixto Global Investors, managed by Eduardo Costa, assembled the most outsized position in Expedia Inc (NASDAQ:EXPE). Calixto Global Investors had $17 million invested in the company at the end of the quarter. Joseph A. Jolson’s Harvest Capital Strategies also made a $15.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Adam Bernstein, Mark Hoffman and Glenn Vogelman’s Pagoda Asset Management, Robert Hays’ Ashford Investment Management, and Solomon Kumin’s Folger Hill Asset Management.
On the final page, we’ll compare Expedia’s popularity to stocks with a similar market cap.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Expedia Inc (NASDAQ:EXPE) but similarly valued. We will take a look at Nielsen Hldg NV (NYSE:NLSN), Vale SA (ADR) (NYSE:VALE), Energy Transfer Partners LP (NYSE:ETP), and Smith & Nephew plc (ADR) (NYSE:SNN). This group of stocks’ market values match EXPE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NLSN | 23 | 474282 | 4 |
| VALE | 18 | 147344 | -6 |
| ETP | 17 | 462170 | -1 |
| SNN | 10 | 136551 | -4 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $305 million. That figure was $3.43 billion in EXPE’s case. Nielsen Hldg NV (NYSE:NLSN) is the most popular stock in this table. On the other hand Smith & Nephew plc (ADR) (NYSE:SNN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Expedia Inc (NASDAQ:EXPE) is far more popular among hedge funds. Considering that hedge funds are very fond of this stock in relation to its market cap peers and that it appears poised for further growth, it may be a good idea to analyze it further and potentially include it in your portfolio.
Disclosure: None
