We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where Booking Holdings Inc. (NASDAQ:BKNG) stands against the other stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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A fast-paced travel agent making a bookings for a family vacation package.
Booking Holdings Inc. (NASDAQ:BKNG)
Hosking Partners’ Stake Value: $70,003,667
Percentage of Hosking Partners’ 13F Portfolio: 2.59%
Number of Hedge Fund Holders: 96
Booking Holdings Inc. (NASDAQ:BKNG) is a leading provider of online travel and related services, offering hotel bookings, car rentals, flight reservations, and dining options through well-known brands like Booking.com, Priceline, Agoda, Kayak, and OpenTable. The company benefits from a large user base, boasting over 100 million users of its software application in 2023, and 563 million site visits in May 2023. This extensive user data allows the company to employ AI solutions like Trip Planner and Penny to enhance customer service.
The company is well-positioned for continued growth, driven by a shift in travellers preferences toward booking entire trips online, particularly among Millennials and Gen Z. In Q2, Booking Holdings reported a 7.3% year-over-year revenue increase, reaching $5.86 billion, surpassing Wall Street’s expectations. The company saw a 7% rise in room nights booked, totaling 287 million, and gross travel bookings grew by 4% to $41.4 billion. Earnings per share (EPS) increased by 27% year-over-year to $44.38.
Booking Holdings continues to expand its diverse service offerings, with a strong focus on integrating artificial intelligence (AI) and technology. Innovations like a generative AI-assisted trip planner and upgraded mobile apps have streamlined booking processes and improved user experiences. The company has also expanded its revenue streams with advancements in flights, ground transportation, and restaurant reservations via OpenTable.
Despite the popularity of platforms like Airbnb, Inc. (NASDAQ:BKNG), there remains strong demand for traditional hotel accommodations and the convenience of OTAs, suggesting a thriving market where Booking Holdings will continue to benefit from providing comprehensive and efficient booking solutions.
Wedgewood Partners stated the following regarding Booking Holdings Inc. (NASDAQ:BKNG) in its Q2 2024 investor letter:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed to performance as travel spending across the U.S. and Europe remains quite healthy, whereas the Company took share in alternative accommodations, and looks set to expand margins after a few years of reinvestment. The Company has also been aggressively reducing its share count at reasonably attractive valuation multiples. Booking should be able to compound earnings at an attractive, double-digit rate for the next few years given these various initiatives.”
Overall BKNG ranks 8th on our list of the best stocks to buy according to Hosking Partners. While we acknowledge the potential of BKNG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BKNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
